The sharp improvement in electricity production and consumption in December is an indication of similar rises in production levels to be expected in the economy, according to analysts.

Electricity consumption growth improved significantly in December rising to 7.5 percent y/y from 3.3 percent y/y in December.

Although the 4.2 percent rise reflects a statistical distortion related to the sharp decline in electricity production in December 2009, as the recession reached South African shores, the distortion does not fully explain the considerable improvement in energy consumption which is in line with a similar improvement in the Kagiso PMI for the month, analysts point out.

"As with the improvement in electricity consumption in November 2009, the above figures are a forewarning of a considerable rise in manufacturing and mining production during the December month, promising further sharp improvements in production growth in these sectors," the analysts say.

"Whilst the improvements in production are welcome, there is no doubt that much of the recovery in mining and manufacturing production that the economy is currently experiencing is as a result of a number of monetary and fiscal interventions on the international front, which are expected to draw to an end during the course of 2010.

"This places some doubt on the longevity of the current recovery in these sectors, especially if sharp upshots in production growth as recorded in November continue. This could lead to similar declines in production later on in the year or in 2011," the analysts say.

"Encouragingly," they add, "electricity production growth was able to match the sharp rise in energy consumption during the month, easing concerns of electricity capacity somewhat. Electricity production rose to 7.2 percent y/y from 1.2 percent y/y in November, albeit also reflecting similar statistical distortion to electricity consumption growth.

" The 6.0 percent improvement in y/y growth will no doubt contribute positively to overall GDP, with the average y/y growth in electricity production up from -1.2 percent y/y in Q3 to 1.6 percent y/y in Q4."