Factory output gears up

FACTORY output grew at a faster pace than expected in the year to December - breaking 14 months of annual contraction - in yet another sign manufacturers are recovering after last year's economic downturn.

FACTORY output grew at a faster pace than expected in the year to December - breaking 14 months of annual contraction - in yet another sign manufacturers are recovering after last year's economic downturn.

Though consumer demand remains depressed, the strong manufacturing number could dampen expectations of interest rate cuts to help boost growth after Africa's economic powerhouse emerged from its first recession in nearly two decades late last year.

Statistics SA said yesterday manufacturing output surged to 3,2percent year-on-year in volume terms in December compared with a revised 4,6percent contraction in November - outpacing economists' forecasts of a 0,9percent increase.

The data comes after the latest purchasing managers' index rose to a seasonally-adjusted 53,6 points in January, its sixth straight gain after wallowing below the key 50 level for 18 months.

"This is one more arrow in the right direction indicating the economy is in the recovery phase," KADD Capital economist Elize Kruger said.

The haemorrhaging of jobs caused by the recession halted in the fourth quarter of last year, but the government remains under pressure to honour election promises to reduce unemployment, currently at just under 25percent of the labour force. - Reuters

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