* Food and beverages lead May growth
* Factory output seen struggling in months ahead
(Adds details, background, market reaction)
JOHANNESBURG, July 12 (Reuters) – South Africa’s factory
output grew above expectations in May compared with last year,
backing the case for interest rates to stay unchanged at next
week’s policy meeting, although the central bank may cut them
later this year to buoy the economy.
The Reserve Bank has kept rates at three-decade lows since
late 2010 but some analysts believe it might have to give
domestic growth more stimulus as a global downturn hurts exports
while inflation is seen staying within target until 2014.
Growth in manufacturing production, which accounts for about
15 percent of GDP, outpaced forecasts at 4.2 percent
year-on-year in volume terms in May, after rising by 1.1 percent
in April, Statistics South Africa said.
The median consensus among economists polled by Reuters was
for factory output to grow by 1.0 percent in May.
But the outlook for the rest of the year remains gloomy,
with sales to Europe, South Africa’s main trading partner,
waning as the region struggles with the impact of its debt
crisis.
“(The May data) is encouraging but I don’t unfortunately
think it’s very revealing about what lies ahead because the
global situation actually deteriorated so it catches us with a
lag,” said Nicky Weimar, a senior economist at Nedbank.
“The third quarter is probably going to be weaker than this
number suggests.”
Continued…
