HIGH-PROFILE political events such as US President George Bush's visit to SA this week and the African Union summit in Mozambique will overshadow a quiet week on the markets, with no market-moving data expected locally.

However, manufacturing data although not likely to move the markets will be keenly watched to give some indication of the country's growth prospects in the second quarter.

Statistics SA will release both mining and manufacturing production figures tomorrow.

Production volumes in the manufacturing sector have come under pressure this year as a result of weak global demand conditions and the stronger rand, which have diminished the competitiveness of manufacturing exports.

Trade liberalisation and government's export-oriented growth strategy have resulted in a much more export-reliant manufacturing sector than a decade ago.

About half of what the manufacturing sector produces is exported, according to some estimates, making growth in the sector more dependent on foreign demand.

Global economic growth has softened considerably in the past year. The International Monetary Fund has downgraded its growth forecasts in major developed economies such as Japan, Europe and US, expecting world economic growth to rise by 3,2% this year.

Despite the weaker global demand conditions last year, the saving grace for the local manufacturing sector was the depreciation in the rand in late 2001, which improved the competitiveness of manufacturing exports. The boom in manufacturing exports helped support gross domestic product, which increased 3% last year.

However, the tables have turned this year, with the rapid appreciation in the rand adding to the woes of the manufacturing sector already taking a knock from sluggish external demand.

The rand has gained 14% against the dollar this year along with its 40% gain last year to trade around R7,50 to the dollar last week.

Exporters have bemoaned the sharp rise in the rand, which has cut revenues while costs have remained fairly high.

Rand strength and a drop off in external demand has seen manufacturing production volumes fall sharply this year, with indications that the sector was heading for a recession.

According to the Reserve Bank's quarterly bulletin, the real value added by the manufacturing sector declined from an annualised rate of 4% in the fourth quarter to a contraction of 0,5% in the first quarter.

The Investec purchasing managers' index, which gives an indication of business conditions in the manufacturing sector, recorded its third monthly reading below the critical 50 level last month, signalling the manufacturing sector was in recession.

Statistics SA will release manufacturing data for May, which is expected to be weaker after a sharp drop of 4,9% in production volumes in April.

Standard Bank said the drop off in manufacturing production could result in an underutilisation of productive capacity in the sector.

"Also, weaker output might have negative consequences for fixed investment, especially since testing reveals that fixed investment in the sector is more responsive to output changes that the level of interest rates," said Standard Bank.

The Reserve Bank will also release the latest figures for gross gold and foreign exchange reserves today. Gross reserves are reported in rands and the variability in the local currency has an impact on the reserve figures.

At the end of May, reserves stood at R8,3bn, largely due to the depreciation in the local currency during the month.

According to Merrill Lynch economist Nazmeera Moola, the rand's 7,5% appreciation against the dollar last month should see gross reserves fall to R58,2bn.

However, the Bank's $1bn syndicated loan issued last month would help boost reserves .

The Bank said last month it would use half of the proceeds from the loan to increase gross reserves.