Manufacturing sector growth slowed from 18-month highs in December, a survey showed today, as a strong kiwi dollar and high interest rates had a dampening effect.
The seasonally adjusted Business NZ Performance of Manufacturing Index (PMI) was at 53.8, down 2.9 points from November, though still above the50 level that indicates manufacturing is expanding.
Business NZ chief executive Phil O'Reilly said it was disappointing to see the level of growth slow, but the survey showed the sector was still in good shape.
"Despite the various issues manufacturers have had to deal with during 2007 including the persistently high New Zealand dollar, ongoing staff shortages and increased competition from offshore markets, manufacturing activity has been at its best level in three years," Mr O'Reilly said.
The average PMI result for 2007 was 55.1, compared with 53.3 in 2006 and 50.9 in 2005.
Pessimism amongst respondents increased during the month, with negative comments increasing to 54.3 per cent from 44.5 per cent in November.
The main concerns raised by manufacturers were the strong New Zealand dollar, flat markets and staff shortages.
The New Zealand dollar increased 0.5 per cent against the US dollar in December and gained 8.7 per cent over 2007.
A rise in the currency makes New Zealand's exports less competitive on world markets, but it also makes the price of imported raw materials cheaper.
Manufacturers also had to cope with 100 basis points worth of interest rate hikes from the Reserve Bank of New Zealand last year, taking official rates to their current lofty 8.25 per cent.
All five of the PMI's sub-indices showed an expansion in activity for the fifth consecutive month, with new orders strongest at 55.4, just ahead of production at 55.0.
