SA economy shows signs of recovery

FACTORY output shrank at a much lower rate in November, bolstering hopes the economy is slowly getting back on its feet after the recession and in the face of weak domestic demand.

FACTORY output shrank at a much lower rate in November, bolstering hopes the economy is slowly getting back on its feet after the recession and in the face of weak domestic demand.

The data reinforces the view that there will probably not be any more interest rate cuts this year after the Reserve Bank reduced them by 500 basis points between December 2008 and August last year to help the struggling economy.

Data from Stats SA yesterday showed manufacturing production contracted by 4,7percent year-on-year in volume terms in November compared with a revised 9,6percent fall in October, from 9,3percent.

Economists polled by Reuters last week had predicted a year-on-year decline of 5,7percent for November.

"It's fairly in line with the improvement in economic conditions we've been anticipating," said Kabelo Masike, an economist at Eskom.

Africa's biggest economy has grown by an annualised 0,9percent in Q3 2009 after three consecutive quarters of contraction.

"We continue to believe that monetary policy's contribution to the recovery has largely played out," said Absa Capital macro strategist Jeffrey Schultz. - Reuters

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