NZ manufacturing slips further

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New Zealand's manufacturing new orders slipped to their lowest level in 15-months as the sector continued to lose momentum amid a patchy economic recovery.

The BNZ-Business NZ Performance of Manufacturing Index provides an early indicator of activity levels, with a reading above 50 indicating expansion, below 50 a contraction.

The new order index fell one point in August, extending a 9.8 decline in July.

The full PMI index fell to 49.3, down from 49.9 in the previous month.

"The manufacturing sector as lost momentum over the recent month," said Stephen Toplis, head of research at Bank of New Zealand.

"While it is far from the depths of the sub-40 during the worst of the recession, the recent PMI readings certainly point to a sector currently jogging on the spot rather than pushing forward."

The release comes just after the Reserve Bank sat on the official cash rate due to the deteriorating economic recovery, and reined in its forecast interest rate hikes by more than a percentage point over the coming years.

Of the PMIs other indices, production was much the same as in July at an expansionary 51.2, employment was down but still in expansion at 51.3, and finished stock was at 50.4, down 1.9 on the previous month.

Unadjusted results by region showed a contraction in the central region, which includes central and lower North Island, at 46.9, down 9.1 from July. Otago and Southland fell 3.6 to 44.7.

The Northern region returned to expansion at 53.4, up 5.6 from July, and the Canterbury and Westland region rose 2.6 to 52.

BNZ noted that while results from Canterbury manufacturers were collected prior to the earthquake, the disaster is not expected to have an overly negative impact since larger manufacturers escaped relatively unscathed.

Reserve Bank governor Alan Bollard said today's pause in tightening monetary policy wasn't changed because of the earthquake.

Manufacturing by industry sub groups were a mixture of expansion and slight contraction in August. Food, beverage and tobacco continued to grow at 60.5, while petroleum, coal and associated product were flat at 50.3. Metal product manufacturing was in contraction at 47.3, and machinery and equipment manufacturing was still in contraction at 48, but up from 41.5 in July.

Surveyed comments about market conditions had 52.8 per cent negative comments, lower than last month, versus 42.7 per cent of comments that were positive. Negative comments again focused on orders slowing domestically with flat consumer demand.

Positive comments were largely related to export orders and the typical seasonal increase.