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Manufacturing slowdown continues

Manufacturing slowdown continues


Manufacturing activity continued to show decline during May, although the slowdown was not as strong as that recorded in the previous month.

The latest ANZ-Business NZ Performance of Manufacturing Index showed a May value of 49.3, up from 47.9 in April. Scores above 50 indicate that activity is expanding; below 50 indicate a decline.

The 2005 results for both April and May were similar to activity levels during the same time in 2003, although the results for 2005 show a stronger level of decline.

The South Island was the main driver of the overall decline, with the Otago/Southland (46.8) and Canterbury/Westland (48.9) regions both recording significant falls from the previous month. The Northern region (49.4) also showed a slight decline, while the Central region (50.1) was close to displaying no change in activity.

The new orders (50.7) sub-index was the only one to show expansion during May. Production (49.7) displayed only slight contraction in activity, while the remaining indexes displayed moderate declines.

The May result represented somewhat of a small recovery from April, which many manufacturers considered a difficult month in terms of activity. The high value of the New Zealand dollar continues to cause strong concern for those manufacturers who predominantly export their goods. However, recent softening of the New Zealand dollar may ease concerns as long as further depreciation takes place.

Full results are available on www.anz.co.nz under > '> ANZ Spotlight/Economics> '> and on www.businessnz.org.nz under > '> PMI Reports> '> .

The ANZ-Business NZ PMI (performance of manufacturing index) is sponsored by business banking specialist ANZ National Bank Ltd and draws on the depth of member companies associated with Business NZ: Employers and Manufacturers Association (Northern), Employers and Manufacturers Association (Central), Canterbury Employers Chamber of Commerce and Otago Southland Employers Association.

ENDS


ANZ-BUSINESS NZ PMI FOR MAY 2005

The ANZ-Business NZ Performance of Manufacturing Index (ANZ-Business NZ PMI) is a monthly survey of the manufacturing sector providing an early indicator of activity levels. The ANZBusiness NZ PMI contains data obtained through Business NZ’s regional organisations: Employers & Manufacturers Association (Northern), Employers & Manufacturers Association (Central), Canterbury Employers’ Chamber of Commerce and Otago Southland Employers’ Association. When interpreting the data, a PMI reading above 50 points indicates manufacturing is generally expanding; below 50 indicates it is contracting; the distance from 50 indicates the strength of expansion or contraction.

KEY FINDINGS

The ANZ-Business NZ Performance of Manufacturing Index was 49.3 for May; the second consecutive decrease in manufacturing activity and lower than the May results for 2003 and 2004.

In contrast to April, the South Island was the main driver of the overall decline, with the Otago/Southland (46.8) and Canterbury/Westland (48.9) regions both recording significant falls from April. The Central region (50.1) was close to recording no change, while the Northern region (49.4) experienced a relatively small decline.

New Orders (50.7) experienced slight expansion after a decline in April, and improved sufficiently to lead the sub-indexes for May. Production (49.7) experienced little change, while employment (47.2), finished stocks (48.5) and raw materials (49.2) showed slight declines.

Manufacturing activity was generally mixed across industries. The metal product (53.8), machinery & equipment (52.0) and food, beverage & tobacco (51.5) all recorded expansion, while those industries recording a decline ranged from 39.7 to 49.5.

Most firms by size registered a decline in activity for May. Small-medium firms (11-50 workers) (50.8) recorded the only expansion during the month, while both large firms (101+ workers (49.0) and medium-large firms (51-100 workers) (48.7) displayed similar levels of decline. Micro firms (1-10 workers) (46.7) experienced the strongest level of decline since April 2003.

The May result represented somewhat of a small recovery from April, which many manufacturers considered a difficult month in terms of activity. The high value of the New Zealand dollar continues to cause strong concern for those manufacturers who predominantly export their goods, although recent softening of the New Zealand dollar may ease concerns as long as further depreciation takes place.

PRODUCTION

The ANZ-Business NZ production diffusion index stood at 49.7, the third lowest production value on record. The May 2005 result was also lower than both May 2003 and 2004.

The machinery & equipment (57.5) sector showed healthy expansion, as did the metal product (56.1) sector. In contrast the textile, clothing, footwear & leather (36.5) sector showed a strong decline.

Manufacturers in the Central region (52.3) experienced some expansion in production, while the Northern region (50.0) showed no change. Both South Island regions showed some decline.

EMPLOYMENT

The ANZ-Business NZ employment diffusion index (47.2) recorded its lowest ever level of activity, narrowly eclipsing the January 2004 result (47.3). This is in contrast to the April 2005 result where the employment index experienced the strongest level of expansion amongst the major indexes.

All industries experienced a decline in activity during May, led by the wood & paper product (43.8) sector. The petroleum, coal, chemical & associated product (49.0) faired the best with a minimal decline.

All regions except the Canterbury/Westland region (51.1) recorded a decline in employment activity for May. The lowest value was for the Otago/Southland region (43.8), while both North Island regions experienced relatively similar levels of decline.

NEW ORDERS

The ANZ-Business NZ new orders diffusion index for May (50.7) was the only major index to record expansion during the month, although at a modest level. The new orders index has tended to provide the highest sub-index value over the history of the survey.

Both the ‘other’ manufacturing sector (57.1) and the metal product (57.0) sector showed similar levels of expansion during May, followed by the machinery & equipment (55.8) sector.

Both the Central (53.8) and Northern (50.3) showed some expansion in new orders during May, while the Canterbury/Westland (47.8) region was the only one to experience a decline.

FINISHED STOCKS

The ANZ-Business NZ finished stocks (48.5) sub-index continued to record a decline after experiencing its lowest ever value during the previous month.

The metal product (58.8) and ‘other’ manufacturing (52.4) sectors were the only two to record expansion during May.

The Canterbury/Westland region (54.4) was the only region to experience expansion in May, while the Otago/Southland region (35.4) recorded its lowest ever result for finished stocks since April 2003.

DELIVERIES

The ANZ-Business NZ deliveries of raw materials diffusion index stood at 49.2 for May.

The metal product (53.5) sector was the only one to record expansion during the month.

Deliveries of raw materials experienced no change for the Northern, Canterbury/Westland and Otago/Southland regions (all 50.0), while the Central region (46.2) experienced a decline.

National Indexes
May 2003 / May 2004 / Apr 2005 / May 2005
ANZ-Business NZ PMI 49.6 54.1 47.9 49.3
- Production 49.8 / 55.6 / 46.1 / 49.7
- Employment 48.8 / 50.4 / 50.7 / 47.2
- New orders 50.3 / 58.2 / 47.9 / 50.7
- Finished stocks 50.3 / 48.4 / 48.1 / 48.5
- Deliveries 49.0 / 52.2 / 47.2 / 49.2

Regional Indexes*
May 2003 / May 2004 / Apr 2005 / May 2005
ANZ-Business NZ PMI 49.6 54.1 47.9 49.3
- Northern 47.9 / 55.7 / 46.6 / 49.4
- Central 50.1 / 52.0 / 45.4 / 50.1
- Canterbury/Westland 53.4 / 57.3 / 53.2 / 48.9
- Otago/Southland 51.8 / 51.3 / 51.3 / 46.8

*Regions (grouped according to Business NZ’s associated regional organisations)

Northern (Employers and Manufacturers Association (Northern)): Northland, Auckland, Waikato, Bay of Plenty
Central (Employers and Manufacturers Association (Central)): Gisborne, Hawke’s Bay, Taranaki, Manawatu, Wanganui,
Wellington, Nelson, Tasman
Canterbury/Westland (Canterbury Employers Chamber of Commerce): Canterbury, Marlborough, West Coast
Otago/Southland (Otago Southland Employers Association): Otago, Southland

Next ANZ-Business NZ PMI (June results): 15 July 2005

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