Rand firms against dollar as manufacturing data surprises to the upside
JOHANNESBURG - The rand was stronger yesterday afternoon as betterthan-expected manufacturing data buoyed sentiment in the forex market, in a flat euro environment.
SA’s manufacturing output grew 2.3 per cent in May from the same month in 2017. On a monthly basis, the sector grew 1.5 per cent, after declining by a revised 0.5 per cent in April 2018. The market was expecting production to rise by a modest 0.4 per cent month on month.
However, mining production continued its downward trajectory in May, contracting 2.6 per cent year on year, its third consecutive month of falls. However the rate of contraction did slow, after a 4.4 per cent fall in April.
Coupled together, yesterday’s figures suggest that the contraction in SA’s economy slowed in the middle of the second quarter, Capital Economics analysts said. “Even so, GDP probably continued to fall.”
The focus now turns to retail sales for May, which are due next week. A subdued number will raise the possibility of another negative quarter, technically placing the country into recession, following the contraction in GDP of 2.2 per cent in the first quarter.
“However. we remain optimistic that SA can achieve positive GDP growth in the second quarter, albeit only fractional,” Stanlib economist Kevin Lings said.
The dollar was little moved after the inflation rate in the US edged up to 2.9 per cent in June from 2.8 per cent in May, matching market expectations. It is the highest rate since February 2012.