Manufacturing rises, employment slows

The manufacturing sector has been expanding since October 2012. Photo / Stuart Munroe

New Zealand manufacturing activity rose in April, after two months of slowing growth, led by new orders and production, while employment contracted for a third month.

The BNZ-BusinessNZ performance of manufacturing index rose to a seasonally adjusted 56.5 last month from 54.7 in March. A reading above 50 indicates expansion.

The manufacturing sector has been expanding since October 2012 and has held above its long-term average for the past 11 months, which BNZ economist Doug Steel said was underpinned by migrant-driven population growth, a tourism boom, construction activity, low interest rates, rising asset prices, and a robust labour market.

Much of that strength was expected to be reflected in first-quarter retail sales data today, he said. "The bounce in April not only arrests that previous mild momentum loss, but affirms the underlying above-average growth pulse that the manufacturing sector has displayed for many months now," Steel said.

The PMI showed the measure of production rose to 57.9 last month from 55 in March and new orders rose to 60 from 58.2. Finished stocks fell to 53.7 from 55.3 and deliveries rose to 56.8 from 51.9. Employment improved to 49.5 from 48.6.

Steel said even though the PMI was healthy overall, it may be "a bit soft" in terms of gross domestic product in the near term.

He said the caution came mainly from other indicators of the food-processing industry, especially a drop in meat processing in the first quarter following "an earlier surge likely associated with meat pricing, an elevated dairy cow cull, and most importantly weather risks".

The volume of meat processed in the first quarter was down 10.9 per cent from the same quarter last year and dairy product had also been subdued, he said. The food, beverage and tobacco PMI index slowed to 52.0 in April, its lowest April reading since 2008.