NewswireToday - /newswire/ -
Dallas, TX, United States, 2008/01/25 - According to reports emanating from US brokerage Alford & Sons Investments (ASI), the brief rally in South Africa’s Manufacturing sector seen during last year has not evolved into a full-blown recovery.
Sources close to JB have pointed to recently published Manufacturing data for November, showing that growth slowed to an annual 4.4%, from a revised 5.7% in October.
Fears of recession in the US, and more recently, Japan – the world’s two largest economies, have compounded a recent wave of weak economic data from Africa’s largest economy and unconfirmed comments from ASI analysts suggest that the negative trend is set to continue.
Higher lending costs and a strengthening rand have produced a classic one-two punch to undermine the competitiveness of South African Factories; The Reserve Bank raised its repurchase rate by 1.5 percentage points to 10.5 percent between June and October last year to curb consumer demand and inflation, which has exceeded the bank's 3 percent to 6 percent target range since April. The bank raised the lending rate a further half point in December, and apparently, JBs regional analysts believe another half point raise will be announced on Jan 31.
South African house-price inflation slowed to an eight-year low of 11.2 percent last month as rising interest rates curb demand, according to a report today from Absa Group Ltd., the nation's biggest mortgage lender.
Higher lending rates have also reduced new vehicle sales, with sales dropping an annual 15.1 percent December, the most in more than five years..
However, the source from Alford & Sons did note that global recession concerns tend to have a negative effect on high-risk currencies like the rand, which could in turn bolster the competitiveness of the regions exports.
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