Brian Fallow

The Economics Editor of the NZ Herald

Manufacturing on rise

Soaring building activity and strong domestic spending growth have been positive for the manufacturing sector. Photo / Dean Purcell
Soaring building activity and strong domestic spending growth have been positive for the manufacturing sector. Photo / Dean Purcell

A gauge of manufacturing activity continues to point to moderate expansion.

The BNZ-Business New Zealand performance of manufacturing index (PMI) was 53 last month, 0.4 points lower than in June but marginally above its long-term average since the survey began in 2002. Any level above 50 indicates the sector is generally expanding.

"While we have experienced 15 months of strong expansion prior to April, recent results show that the sector is still clearly in positive territory," said Business NZ's executive director for manufacturing Catherine Beard.

"In addition, comments from respondents still remain on the upbeat side."

Among the sub-indices, new orders led the way at 55, up from 52.2 in June, but production at 54 was down 1.9 points to its lowest level since March last year.

Employment also dipped, dropping 1.4 points to 51.3.

Last week's June household labour force survey from Statistics New Zealand showed employment in the manufacturing sector flat on the March quarter but up 1.6 per cent or 3900 people on a year ago.

BNZ economist Stephen Toplis said manufacturing had probably passed its peak in terms of growth, consistent with the broader economy which was peaking about now. But the levels of activity were still robust, he said, as much of the manufacturing sector provided inputs to the buoyant construction sector.

The stronger-than-expected June quarter retail sales figures released yesterday also explained, in part, why the manufacturing PMI remained well in expansion territory as the sector benefited from strong domestic spending growth and soaring building activity, Toplis said.

NZIER's recent quarterly survey of business opinion (QSBO) recorded positive expectations among manufacturers for both domestic and export sales.

"Close to average export sales expectations is a commendable result given that the New Zealand dollar remains a long way above average. Export expectations may well lift as the dollar has eased back since the last QSBO and more so if the currency falls further as we think it will."

- NZ Herald

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