This increase was mainly due to a 9% higher production in petroleum, chemical products, rubber and plastic products and a 6.8% increase in the production of wood and wood products, paper, publishing, and printing.

The manufacturing production of food and beverages was up 2% and motor vehicles, parts and accessories and other transport equipment increased by 4.2%. Basic iron and steel, non-ferrous metal products, metal products and machinery was up 1.5%.

Seasonally adjusted manufacturing production increased by 1.6% in May 2016 compared with April 2016. This followed month-on-month changes of 0.4% in April 2016 and -0.5% in March 2016.

Seasonally adjusted manufacturing production increased by 1% in the three months ended May 2016 compared with the previous three months. Four of the ten manufacturing divisions reported positive growth rates over this period.

The largest contributions to the 1% increase were made by motor vehicles, parts and accessories and other transport equipment (9.5%); petroleum, chemical products, rubber and plastic products (1.8%); and wood and wood products, paper, publishing and printing (1.3%).

According to Nedbank's economic unit, the 4% quickening in the annual growth in manufacturing production in May from a 3.1% increase in April, is above both the unit's as well as the market's expectation of a 2.5% and 2.4% increase respectively.

"The better than expected manufacturing production numbers in May are encouraging, but conditions in the manufacturing sector are expected to remain relatively subdued this year," Nedbank cautioned.

"The fortunes of the manufacturing sector are closely linked to those of the mining industry and with mining being adversely affected by low commodity prices - which are unlikely to reverse convincingly in the short term - manufacturing production is also likely to suffer. In addition, considerable global excess capacity and rising domestic production costs will also negatively impact production."

While the latest manufacturing figures are encouraging, other data suggests that the economy is still not on a path to a sustainable recovery, Nedbank added.

In its view, this leaves the SA Reserve Bank (Sarb) in a difficult position of determining rates in an environment of very low growth - Nedbank forecasts that GDP will decline by 0.1% this year - and inflation, which is forecast to average 6.5% in 2016.

"However, given the pullback of the rand and the reduced likelihood of any tightening in the US, we forecast that the bank will probably pause the hiking cycle later this month. Our view is that the SARB will only raise rates by 25 basis points one more time this year in September, but this will again be dependent on developments in the currency."

- News24.com