Manufacturing sales volumes squeaked higher in the March quarter, the first rise in 15 months.

Total seasonally adjusted sales volumes for the March quarter were up 0.2 per cent from the previous three months, Statistics New Zealand (SNZ) said today.

The rise was due to a 23.1 per cent increase in volumes for meat and dairy products. The only two other industries with increases were petroleum and industrial chemicals, and beverages, malt and tobacco.

Of the 12 industries to record declines in seasonally adjusted sales volumes in the March quarter, nine were recording their second - or more - consecutive quarterly decrease, SNZ said.


ASB economist Jane Turner said the latest results were "surprisingly resilient", although the strength appeared to have come from dairy and meat production.

"The strength in dairy and meat sales comes as dairy production recovers from the previous season's drought. As a result, the gain is likely to be temporary with next quarter's manufacturing sales likely to be very weak in contrast."

The result echoed New Zealand's export numbers, with strong agricultural production masking the underlying weakness in the rest of manufacturing.

While the boost that dairy made to the numbers had been under-estimated, "the underlying manufacturing sector is much weaker than we anticipated," said Turner.

Today's manufacturing results give economists a guide to part of the GDP numbers that Statistics NZ assembles.

"This result suggests some upside risk to our forecasts," said Turner. "And combined with the better than expected Q1 construction activity we have revised up our Q1 GDP forecast."

ASB expects GDP in the first quarter to contract just 0.5 per cent. But given the underlying weakness in manufacturing and building consent numbers, it has downgraded its GDP numbers for the second quarter of the year and is now expecting "a sizable contraction."

In the latest quarter, the largest fall in the manufacturing stats was in transport equipment, which dropped 32.7 per cent. The other food category fell 9.1 per cent, while structural, sheet and fabricated metal products dropped 12.7 per cent.

Despite the small rise in volumes, the seasonally adjusted value of manufacturing sales fell 0.9 per cent or $179 million from the previous quarter, the third fall in four quarters.

Decreases in sales occurred in all but two of the 15 industries covered by the figures, with five industries recording falls in sales of more than $100m, SNZ said.

The falls were led by transport equipment manufacturing, which fell 23.6 per cent or $175m. Structural, sheet and fabricated metal products were next, down 9.7 per cent or $129m, followed by wood products, down 11.3 per cent or $125m.

Offsetting the falls was a 10.9 per cent, or $709m, rise in meat and dairy product sales.

Stocks of finished goods for all manufacturing industries, which are not seasonally adjusted, were up 2.8 per cent in volume for the March quarter compared with a year earlier. Stock values were up 9.3 per cent or $822m.

Excluding meat and dairy products, sales volumes were down 6.5 per cent, while sales values were down 5.5 per cent or $798m, the largest recorded fall in values since the series started in 1992.

The rise in meat and dairy product manufacturing volumes followed four quarters of volume falls during 2008, which was the only time that had happened since the series started, SNZ said.

The rise in volumes was mostly due to increased dairy product export volumes, which rose 14 per cent, while meat exports fell 0.9 per cent.

While prices for dairy product manufacturing fell sharply in the March quarter, a large volume increase resulted in the $709m rise in sales values.

- NZPA

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