PRODUCTION in two key drivers of domestic growth - manufacturing and mining - rose much more than expected in May, but analysts warn the improvement could be temporary given a slowing global economy and a weaker leading indicator of activity in one of the sectors.

The Kagiso purchasing managers index (PMI) an indicator of what is likely to happen in manufacturing a month ahead fell to 48,2 in June. An index level of below 50 suggests that output in the sector fell.

"The June manufacturing reading will be critical to the overall outcome for second quarter gross domestic product. In that respect, the sharp fall-off in the June Kagiso PMI is especially concerning," Kevin Lings, economist with Stanlib said.

The mining and manufacturing production figures are among those that help estimate growth of the economy. Figures from Statistics SA showed that manufacturing production increased 4,2% year on year in May, while mining production shed a 10-month decline to grow 0,8% on an annual basis in May.

The increase in manufacturing production was mainly supported by higher production in the food and beverages; petroleum and chemical products; and motor vehicles, parts and accessories and other transport equipment divisions.

Ilke van Zyl, economist at Absa Capital, attributed the 2,1 percentage point contribution by the food and beverages division to lower food inflation in the past few months, which she added had helped consumers buy more and consequently encouraged higher production.

Norman Lamprecht, an executive manager at the National Association of Automobile Manufacturers of SA, said general factors that could have driven higher production in the motor vehicles division over the past two months included highly competitive trading conditions, low interest rates, and declining vehicle prices in real terms.

Mr Lamprecht said the recession in Europe was negatively affecting vehicle exports, but new export markets were countering the losses.

"Growth in exports to Australia and Africa are compensating for the European recession and are contributing to higher production. The introduction of popular new vehicle models, higher purchases by government, and higher demand by rental companies, have led to growth in new vehicle sales over the past two months," he said.

On mining, May production figures reflected existing constraints in the sector including waning global demand and generally weaker commodity prices.

Data showed that nongold production rose 1,3% year on year thanks to higher coal and iron ore output, while platinum group metals production fell 6%.

The worst affected, according to the data, was gold. Production fell for the 13th consecutive month on a year-on-year basis. Mining was expected to remain under pressure for most of this year, with the outlook being particularly gloomy for platinum miners.

A task team made up of mining industry players and mineral resources department officials meets once a week to find ways to aid the sector, Chamber of Mines executive Vusi Mabena said.

Mr Mabena, however, would not be drawn into divulging details of the meetings opting instead to note that "each of the social partners are making meaningful contributions".

maswanganyin@bdfm.co.za