Signs of life in NZ manufacturing?

Photo / NZ Herald

Signs of life have re-emerged in New Zealand's manufacturing sector, according to one indicator.

New Zealand manufacturing returned to a minor level of expansion in October, although the sector remained in a flat state, going on the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for October was 50.5 - up 2 points from September and the first level of expansion after four consecutive months of no expansion. Over the last quarter, the PMI has averaged 48.8, and the year to date at 51.2.

A PMI reading above 50.0 indicates that manufacturing is generally expanding while a drop below 50.0 indicates a decline.

BusinessNZ's executive director for manufacturing Catherine Beard said that any return to expansion was positive news, "but no one should think this is the immediate start of better times ahead for the sector".

"Looking at the history of the survey, we've just come out of the longest consecutive period of contraction since 2009," she said.

On the plus side, an improvement in production and a sharp rise in the number of positive comments by manufacturers are welcome. However, new orders remain historically low, while those employed in manufacturing have been in decline for five consecutive months, she said.

BNZ senior economist Craig Ebert said the October result gave hope that the sector was stabilising after going through a rough patch in recent months.

He said the PMI result was "relief" but that headwinds for the manufacturing still prevail.

"The NZ dollar remains high, international demand is patchy, and the New Zealand economy is looking a bit bumpy and hesitant, including in employment," he said in a statement.

"Until we see a more concerted and consistent pulse in the PMI, we'll stay reticent about the sector's immediate growth prospects," he said.