KEY POINTS:
New Zealand manufacturing activity accelerated in May as new orders remained strong and offset the negative impact from a strong local currency, a survey showed on Thursday.
The seasonally adjusted Business NZ Performance of Manufacturing Index (PMI) rose to 56.8 last month from 54.4 in April, but was down from 58.1 in May last year.
A figure over 50 indicates manufacturing is expanding, while under 50 indicates contraction.
"The high dollar is still the hot issue, but the continued growth in new orders augurs well for future growth prospects," Business NZ economist John Pask said in a statement.
Four of the PMI's five sub-indices rose on the previous month, with product and finished stocks showing the strongest gains. Deliveries was the only measure to decline from April.
Pask said the strength of the New Zealand dollar was the most-mentioned negative factor facing manufacturers, but rising interest rates were also identified, along with signs of slowing demand, and a shortage of skilled labour.
The New Zealand dollar hit a 22-year post-float high of US76.40c on Saturday (NZT), supported by New Zealand's high interest rates.
However, the Reserve Bank of New Zealand intervened in the foreign exchange market on Monday for the first time since the currency floated in 1985 to bring down what it regarded as an unjustifiably high NZ dollar.
The kiwi has settled lower around US75c since the intervention.
A rise in the currency makes New Zealand's exports less competitive on world markets, although it also lowers the price of imported raw materials.
The central bank last week unexpectedly raised its official cash rate to 8 per cent to curb medium-term inflation pressures generated by a hot housing market and resilient domestic consumption.
A Reuters poll has only three of 16 forecasters expecting a further rate rise, although the median risk of a rise in July was put at 40 per cent.
- REUTERS
