Manufacturing activity remained in positive territory in March, even though it shed some of February's very strong gains, according to the BNZ-BusinessNZ performance of manufacturing index (PMI).
The PMI stood at 54.5 points in March in seasonally adjusted terms, down 3.2 points from the February reading but still the second highest result since May 2011 and the third highest since June 2010. It compares with 49.7 points in March last year.
"The remarkable thing about this particular one is we did expect it to fall because the previous month was surprisingly high," said Stephen Toplis, head of research at BNZ.
"But the fact that it's stayed quite positive is a really good sign." A reading above 50 points indicates activity is expanding.
Only one of the five main parts of the index, finished stocks, read below 50 points at 49.1 points.
Toplis said that's actually a positive sign because previous indications were that manufacturers had been over-stocked.
Unadjusted results by region indicated activity around the country was broadly similar in March to February's levels with the Northern region falling 1.4 points to 51.6 and the Canterbury/Westland region falling the same amount to 50.4.
The Central region strengthened to 62.1 points while the only region still showing a contraction, Otago/Southland at 48.8, still showed an improvement.
Among the sub-groups, food, beverage and tobacco improved significantly to 63.1 points and petroleum, coal, chemical and associated products at 53.2 and metal product manufacturing at 54.7 were at similar levels to February. Machinery and equipment manufacturing dipped to a still expansionary 54.7 points.
BNZ economist Doug Steel said if the index had returned to January's 51 point level or worse, it would have indicated the February reading was "a flash in the pan."
The actual reading fits his view that the manufacturing sector will make a decent contribution to overall March quarter GDP growth, Steel said.