April 11, 2012 / 12:07 PM / 5 years ago

UPDATE 1-S.Africa's Feb manufacturing up as demand rises

* Growth exceeds analysts expectations

* Data points to rising domestic demand

* Rand firmer after data release (Adds details, comment, reaction)

JOHANNESBURG, April 11 (Reuters) - Growth in South Africa's manufacturing output outpaced expectations in February, adding to signs that domestic demand is recovering and backing the case for higher interest rates.

Factory output grew by 4.1 percent year-on-year in volume terms in February from a revised 2.3 percent in January, Statistics South Africa said on Wednesday. Economists in a Reuters survey expected growth of 2.0 percent.

On a month-on-month basis, production in volume terms grew by a seasonally adjusted 2.8 percent. It expanded 1.6 percent in the three months to February compared with the previous three months.

The manufacturing sector contributes about 15 percent of gross domestic product and is a major creator of jobs for the largely unskilled labour force in the country where unemployment has languished for years at around 20 to 25 percent.

"It's a really good number, especially since the manufacturing numbers have had trouble building up steam," Efficient Group economist Merina Willemse said.

"It shows a promising growth in this industry, supporting perhaps a more optimistic economic figure."

The Reserve Bank has left its repo rate unchanged at 5.5 percent in the last 16 months to aid economic recovery after a recession in 2009, but some analysts say monetary tightening could resume at the end of the year to curb inflation.

The rand was firmer at 7.9633 to the dollar from 7.9840 before the manufacturing data was released at 1100 GMT.

The yield on the 2015 bond dipped to 6.75 percent from 6.76 percent prior, while that for the 14-year bond was unchanged at 8.5 percent.

South Africa plans to spend 5.8 billion rand ($724 million)over the next three years to help manufacturers affected by the global economic downturn upgrade their factories, improve products and train workers, the trade minister said this month.

$1 = 8.0160 South African rand Reporting by Stella Mapenzauswa; Editing by Jon Herskovitz

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