Johannesburg - The rand continued a three-day run of gains yesterday, following better-than-expected mining and manufacturing data.
The rand traded at R13.6637 per dollar at 6.23pm, compared with late trade in New York of R13.7109 on Wednesday.
The currency reversed earlier losses after better-than-expected data showed that manufacturing and mining output rose in July, but the data was mainly driven by lower base effects emanating from strikes last year. Manufacturing production rose by 5.6 percent year-on-year in July, after having contracted in each of the previous months. The market forecast was 1.3 percent.
Nedbank economists, Dennis Dykes and Johannes Khosa, said despite the annual increase in July, underlying conditions in the manufacturing sector remained weak, with output increasing by only 0.3 percent month on month on a seasonally adjusted basis and contracting 1.3 percent quarter on quarter in the three months to July.
They said the figures mainly reflected base effects due to the metal workers’ strike in 2014.
“The outlook for manufacturing remains poor, with the electricity crisis, rising production costs, low global commodity prices and patchy global and local demand likely to weigh on production in most major industries.”
Little scope
Sanisha Packirisamy, an economist at MMI Holdings, said: “As a result of rising costs and weak domestic demand, we see little scope for a significant improvement in employment gains and the outlook for infrastructure spend in the manufacturing sector. The outlook for manufacturing remains bleak.”
Annual mining output growth increased marginally to 5.6 percent in July from 5.4 percent in June (previously reported as 4 percent), pushed mainly by the production of platinum group metals which increased by 71.8 percent year on year. The market expectation was 2.8 percent.
On a seasonally adjusted basis, mining production increased by 1.1 percent month -on-month in July, but was down by 4.3 percent quarter on quarter for the three months to July.
Gold production declined by 7.4 percent compared with a year ago.
First National Bank industry economist Jason Muscat said any further strike activity in the mining sector could be enough to push the economy into a technical recession (two consecutive quarters of negative growth), but he remained concerned about waning demand from China and falling commodity prices.
BUSINESS REPORT