Production figures rise after long slump

The manufacturing sector is showing signs of recovery, with new statistics showing total activity rising for the first time after a long period of decline.

Manufacturing sales volumes rose by 3.1 per cent in the December 2009 quarter, according to Statistics New Zealand.

Business statistics manager Louise Holmes-Oliver said the latest result followed a 1.7 per cent decline in the previous quarter, when a nine-year low was reached.

ASB economist Jane Turner said the rise in activity was stronger than expected, and a sign that the sector was emerging from the doldrums.

"The result shows that manufacturing is starting to stabilise," she said.

The industries with the largest volume gains were meat and dairy, up 4.6 per cent, and structural, sheet and fabricated metal products up 7.9 per cent.

The value of total sales rose by 0.7 per cent, or $139 million, after four consecutive quarterly falls.

The smaller rise in values compared with volumes came as values for basic metal manufacturing sales fell 19.1 per cent or $128 million, and values for meat and dairy product manufacturing fell 2.1 per cent or $113 million.

The other food category - which includes such items as seafood, fruit and vegetables, bread, oils and fats, flour, and sugar - recorded a rise in volume of 5.8 per cent and a rise in values of 4.4 per cent or $99 million.

The 19.1 per cent fall in the value of basic metal manufacturing sales came as the volume of sales for the category fell 18.5 per cent, reversing a 21.5 per cent rise in the September quarter and taking the category to a historically low level, Statistics NZ said.

Sales for the industry have an unstable seasonal pattern and so are not seasonally adjusted.

For the structural, steel and fabricated metal category, volumes rose 7.9 per cent, while values rose 7.8 per cent or $89 million.

When meat and dairy product manufacturing was excluded, the volume of sales in the December quarter rose 3.6 per cent, while the value of sales rose 3.1 per cent or $404 million, after five consecutive quarterly falls. Stocks of finished goods, which are not seasonally adjusted, rose 2 per cent in volume for the December quarter compared with a year earlier. Stock values were down 14.2 per cent to $7.9 billion, compared with December2008.

ANZ economist Mark Smith said the results showed a "significant improvement" in manufacturing activity.

"Firming manufacturing sector confidence - both here and overseas - is starting to translate into a pick-up in manufacturing activity."

Smith said a fall in the kiwi's value against the Australian and US dollars was likely to further bolster sentiment and activity.

- Additional reporting NZPA