South Africa Factory Output Falls for Second Straight Month

(Bloomberg) --

South African factory output contracted for the second consecutive month in July as the output of petroleum and chemical products and basic iron and steel continued to shrink.

Manufacturing production declined 1.1% from a year earlier, compared with a revised 3.6% fall in June, Pretoria-based Statistics South Africa said Tuesday in a report on its website. The median estimate of nine economists in a Bloomberg survey was for a 1.5% contraction. Output increased 0.4% in the month.

Key Insights:

• The drop in output is a bad third-quarter start for an economy that managed to dodge a second recession in consecutive years after it expanded an annualized 3.1% in the three months through June.
• Manufacturing accounts for about 14% of gross domestic product and output is very sensitive to power-supply constraints. While Eskom Holdings SOC Ltd. hasn’t implemented large-scale blackouts since the first quarter, a member of the utility’s board, Nelisiwe Magubane, has warned that an uptick in economic growth could lead to a new round of power cuts as Eskom won’t be able to respond to an increase in demand for electricity.

--With assistance from Simbarashe Gumbo and Renee Bonorchis.

To contact the reporter on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net

To contact the editors responsible for this story: Benjamin Harvey at bharvey11@bloomberg.net, Rene Vollgraaff, Jacqueline Mackenzie

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