Manufacturing production surprised on the upside in April, improving by a seasonally adjusted 8.4% over the prior month and pushing the year-on-year increase up to 7% after shrinking by 2.2% in March, according to manufacturing production and sales figures released by Statistics South Africa (Stats SA) on Tuesday.

This was chiefly driven by strong year-on-year growth by the automotive sector, which grew by 18%; the iron, steel and metal components sector, which saw growth of 9.2%; as well as the petroleum, chemical products, rubber and plastics industry, which registered 7.2% growth in output.

The Nedbank Economic Unit, however, attributed the surge in output predominantly to an inadequate adjustment for seasonal factors, as the Easter public holidays fell across both March and April this year, while in 2012 they fell entirely in April.

As a result, there were 21 working days in April this year compared with only 18 in April 2012.

Stats SA acknowledged that its current methodology for the seasonal adjustment of manufacturing did not adjust for shifts in the timing of the Easter public holidays, adding that, were the “Easter effect” to be split between March and April, the month-on-month seasonally adjusted outcome for April would reflect a weaker performance than indicated by the report.

“We are working [at] the roll-out of an improved seasonal adjustment methodology – which has already been implemented in the retail trade report – to all our seasonally adjusted series,” said the organisation.

Nedbank added that the improved monthly production figure was also boosted by the return to production of a large steel foundry, which further drove manufacturing production in April beyond the more subdued 1.2% growth that the market expected.

It believed that the quarterly figures captured a more accurate indication of the underlying performance of the sector, which revealed that total output fell by 1.9% over the three months to April, compared with the previous three months.

Five of the ten manufacturing divisions reported negative growth rates over this period, with the largest negative contributions made by the petroleum, chemical products, rubber and plastic products sector, the wood and wood products industry, the paper, publishing and printing sector, and the furniture and other manufacturing industry.

However, industry body, the Manufacturing Circle, said that the otherwise strong performance by several manufacturing sectors reflected the positive impact of a more competitive currency, as well as improved industrial policy support from the Department of Trade and Industry.

“While volumes in lagging sectors still show strain owing to lacking demand from export markets and weakening consumer demand, margin squeeze is being ameliorated by the weaker rand,” the organisation said.

Looking ahead, Nedbank expected the manufacturing sector to continue to face subdued demand conditions as output growth in the large export-orientated industries was contained by continuing economic downturns in the eurozone, a more measured Chinese economy and weaker international commodity prices.

“At the same time, cost pressures will remain elevated, with high electricity costs, rising unit labour costs and expensive transport and logistics,” said the bank.

“However, a weaker rand, if sustained, should help compensate for some loss of price competitiveness and shore up profitability.”

In the inwardly focused industries, Nedbank expected demand conditions to be broadly softer, while slower growth in household spending and private sector capital outlays would likely contain the benefits of any acceleration in public sector infrastructure spending.

It added that the risk of renewed disruptions to power supply, given winter maintenance at many power stations across the country, could further constrain manufacturing output.

“Consequently, another year of modest production growth is anticipated in 2013,” Nedbank stated.