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South Africa's factory, mining output point to weak GDP growth

A worker assembles a car at a Nissan's manufacturing plant in Rosslyn, outside Pretoria, September 11, 2009. REUTERS/Siphiwe Sibeko (Reuters)

JOHANNESBURG (Reuters) - South Africa's manufacturing output contracted in September while mining production came in below expectations, reaffirming sluggish economic growth for the third quarter of this year. Finance Minister Pravin Gordhan has already cut his growth forecast for the year to 2.1 percent from the 2.7 percent seen in February, citing the impact of power shortages and strikes that have hit the key mining and factory sectors. However, the Reserve Bank has little room to cut lending rates to try and stimulate growth, as consumer inflation remains at the top end of a 3-6 percent target range. Manufacturing volumes fell by 3.3 percent year-on-year in September, the first contraction since March, after rising by 0.2 percent in August, Statistics South Africa said on Thursday. On a month-on-month basis, production was also down 4.7 percent and dropped 2.1 percent in the three months to September compared with the preceding period. Economists polled by Reuters prior to release of the data had predicted year-on-year growth of 0.6 percent for September while output was seen to have fallen 1.1 percent from August. Mining output for the same month was up 0.6 percent compared with the same period in 2012, but undershot market expectations of 3.5 percent expansion. The weak numbers are likely to detract from GDP growth in the third quarter, highlighting the negative impact of labour regulations on the economy, Tradition analytics said in a note, alluding to lows critics say are restrictive to creating jobs. "The weak domestic growth environment is expected to remain a feature in coming months," it said. "However with inflation still sticky at the upper end of the target range and rand above the 10 per dollar, mark, the South African Reserve Bank has little, if any, room to manoeuvre policy to support growth. The rand, which has weakened more than 21 percent against the dollar since the start of the year, retreated slightly on the manufacturing data. The weaker currency has forced the central to hold the benchmark repo rate at a four-decade low of 5 percent since cutting it by 50 basis points in July last year, a stance it will likely maintain at its last policy meeting for 2013 later this month.