Manufacturing slumps in October

The New Zealand manufacturing sector contracted in October to its worst level since June 2009 as the Rugby World Cup distracted business and the construction sector ebbed.

The BNZ-Business New Zealand performance of manufacturing index (PMI) fell 4 points to 46.5 in October from 50.5 in September. A figure below 50 indicates a contraction. The index was 50.9 in October 2010.

The index is the lowest since June 2009 and it is only the third time a decline in manufacturing has been recorded by the index in the month of October.

BNZ struggled to explain the decline but said the Rugby World Cup may have been a distraction for business and there was also unhappiness with the state of the building sector, even in Auckland.

"Is this a genuine stalling, or just another big bump in the road to recovery? Unfortunately it's hard to tell," BNZ said.

The number of respondents who saw the Rugby World Cup as a negative influence was two and a half times the number who saw it as a positive influence.

"This is not to be disparaging of the tournament itself, which, by most accounts, was an enormous success. More that it distracted folk from their day jobs, and caused expenditure switching.

"Some will no doubt have taken time off, even shuttered their businesses for a number of weeks," BNZ said.

The tournament also delayed school holiday until October from September.

The PMI showed finished stock fell to 45.2, employment declined to 48.6, new orders fell to 47.7. Production dropped to 46.4 and deliveries fell to 46.1.

BNZ hopes a back-to-work effect will help mend the PMI over coming months.

A regional breakdown showed a slump in the northern region to 46.6, its lowest result since January 2010. The Canterbury/Westland region snapped five consecutive months of expansion to decline to 48.7 but the central region remained in expansion at 52.7. The Otago/Southland region produced a strong index of 60.