The Star Late Edition

Rand breaks key R14 level as manufactur­ing data surprises on the upside


THE RAND BROKE below the key psychologi­cal mark of R14 to the dollar yesterday to touch R13.96, buoyed by positive sentiment as manufactur­ing output rose more than expected.

This was the second consecutiv­e day this week that the rand dipped below R14 to the greenback, after briefly hitting R13.99 on Monday, driven by the surge in commodity prices.

By 5pm, the rand was bid at R14 against the dollar, 0.01 percent higher from the previous day’s fix at the same time.

Citadel Global director Bianca Botes said the rand was testing a sustainabl­e move below R14 to the dollar, boosted by a strong risk appetite, a weaker dollar and robust commodity prices.

“Commodity-driven currencies, such as the rand, continue to enjoy benefits over the dollar, as commodity prices, such as steel, copper and oil, are expected to increase,” Botes said.

Data from Statistics South Africa (StatsSA) yesterday showed that manufactur­ing production rose 4.6 percent in March from a year before, recovering from an upwardly revised 2.5 percent fall in February.

This was the strongest growth in factory activity since April 2019, well above market expectatio­ns of a 0.45 percent increase, as the economy climbs back to pre-pandemic levels. Total manufactur­ing sales rose by 17.8 percent year-on-year in March and by 5.9 percent from February.

StatsSA director of industry statistics Nicolai Claassen said six of the 10 manufactur­ing divisions recorded a rise in output, led by the food and beverages, which rose by 10.4 percent.

“This was largely underpinne­d by the production of beverages, which increased by 35 percent,” Claassen said. “South Africa’s automotive division increased output by 25.9 percent year-on-year, making it the second-biggest contributo­r to overall manufactur­ing growth in March.”

The Steel and Engineerin­g Industries Federation of Southern Africa (Seifsa) said it was hopeful of a sustained improvemen­t in manufactur­ing production. Seifsa chief economist Chifipa Mhango, however, said any sustained improvemen­t in the manufactur­ing sector would depend on the government’s efforts to revive the economy.

“When you look at these figures, it can be surmised that there is more room for increased activity and hence production,” Mhango said.

On the downside, the biggest negative contributo­r was the petroleum, chemical products, rubber and plastic products division, which decreased by 7.1 percent year-on-year. On a month-to-month basis, output increased by 3.4 percent in March compared with February.

FNB economist Thanda Sithole said the data did not change their view of the manufactur­ing sector’s near-to-medium-term economic activity.

Sithole said manufactur­ing production growth should rebound from lockdown-induced low base effects in 2020, and performanc­e should benefit from easier lockdown restrictio­ns, as well as improving local and external demand.

“We are, however, concerned about the third wave of infections,” Sithole said. “Nonetheles­s, we do not think that the government will implement stricter lockdown restrictio­ns amid an economy that has just emerged from the deepest contractio­n since 1920.”

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