Barclays Capital said that given the manufacturing sector's weight of 18% in overall gross domestic product (GDP), this will likely result in a positive contribution to Q4 GDP growth.
Statistics SA is due to release the fourth quarter GDP on February 28.
Coface said despite fears of another recessionary dip, worldwide manufacturing continues to perform well, recently posting strong quarterly gains in major economies.
SA proved its pliability and manufacturing potential by competing on this global platform.
Manufacturing accounts for a small proportion of GDP in most Sub-Saharan African countries.
Produced goods currently constitute only 14% of Africa's exports. Even in SA, the continent's industrial powerhouse, manufacturing has declined significantly since its peak in 1981.
However, it remains the second largest sector, contributing over 15% of total output and provides 13% of non-farming jobs.
Coface said it was encouraged by the global industrial production data out early in 2012 and generally more constructive data out of the US and China.
This hopefully suggests that by the middle of 2012 SA's manufacturing sector will be better positioned to assist the other lagging local economic sectors to pull themselves out of recession and marginalise the divergence in performance.
For example, cement production is up 14.4% while vehicle production was down 12.6% year on year.
The recent increased maintenance in the petroleum industry, which has distorted data, has exaggerated weaknesses in the manufacturing sector.
It is better to look at the trend cycle index for manufacturing, which shows that although manufacturing has recovered from the 2008/2009 severe recession, it has been stagnating for the past year and remains under some pressure.
Some of the challenges facing manufacturing in SA include skills shortages, rigid labour laws, political instability and inadequate power supply.
The local energy supplier Eskom has warned mining and manufacturers alike that it is functioning at an extremely low reserve margin and power cuts are imminent.
Also putting a damper on growth in this sector is below-standard mining performance as well as agricultural performance and low construction activity.
Although progressing at a tender pace, manufacturing can be seen as a stable industry in an otherwise uncertain economy.
Although most economists are downgrading their 2012 SA gross domestic product (GDP) forecasts, a resurgent seasonally adjusted Kagiso Purchasing Managers' Index (PMI) in January could mean a revising of forecasts upwards in coming months as production finally catches up with strong consumer demand.
The resurgence in manufacturing is not isolated to SA as the global PMI compiled by JP Morgan rose to 51.2 in January from 50.5 in December.
David Hensley, JP Morgan's Director of Global Economics Coordination, said: "The global PMI rose to a seven-month high at the start of 2012.
The PMI shows that order growth has picked up while inventory growth has slowed - a positive combination.
The underlying trend in output growth is still soft, although it will be flattered in the very near-term by the post-flood bounce in Thailand and the resulting restoration of global supply chains."
The PMI, which is a measure of activity in the SA manufacturing sector with 50 the breakeven level, rebounded to 53.2 in January after slipping to 49.4 in December from 51.6 in November.
This was well above what economists expected.
Abdul Davids, the Head of Research at Kagiso Asset Management, said "the January reading of 53.2 is substantially above the consensus expectation of 50.2 and also above most developed countries' flash readings for January."
The SA PMI increase was largely the result of the seasonally adjusted new sales orders index, which jumped to a seven-month peak of 57.3 in January from 48.3 in December and 51.2 in November.
The seasonally adjusted business activity index recovered to 53.6 in January from 49.7 in December and 52.3 in November and only 38.3 in July, when the manufacturing sector was hurt by strike action.
The inventory index declined by 0.7 points to 50.2 and failed to keep pace with new sales orders.
As a result, the PMI leading indicator (new sales orders expressed as a ratio of inventories) rose back above 1, which suggests that the level of inventories is currently low relative to the demand for manufactured goods.
Standard Bank noted that the SA data was consistent with the unexpected rebound in the PMI of its trading partners such as China, US and the UK.
For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.
We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.
Go to: http://www.inet.co.za
