Manufacturing growth continues, but results mixed
February 14, 2008
Manufacturing growth continues, but results are mixed
The level of expansion in the manufacturing sector continued to show expansion during January, although results proved to be a mixed bag, according to the Bank of New Zealand - Business NZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for January stood at 53.3, which was 0.3 points lower than the December result. This represented the third straight fall in the level of expansion, with the average PMI value since the survey began in 2002 at 54.5.
A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for January in the years 2002-2007 ranged from 48.7-57.2. The 2008 result was the second lowest January value, with the 48.7 recorded in 2005 the only time in which a decline occurred.
Business NZ chief executive Phil O’Reilly said that although the first month of 2008 displayed expansion, there were some concerns about elements of the results beneath the national figure.
“Although the seasonally adjusted result was in positive territory, it was the first time since April 2006 that the unadjusted result showed a decline, alongside a strong shift upwards in terms of the number of negative comments from respondents.
“The Sudden fall in activity for the central region due to weak production and new order results is also of concern. The next few months should indicate whether the drops are just seasonal or part of a wider issue relating to a general slowing in manufacturing activity internationally.”
Unadjusted activity for January told the tale of two islands: Both South Island regions again recorded expansionary results, led by the Otago/Southland region (58.8), followed by the Canterbury/Westland region (55.2). For the North Island, the story was very different, with the Northern region (47.2) showing its strongest decline in activity since April 2006, while the Central region (42.3) displayed its worst result since the survey began, falling a further 2.6 points from December.
All five seasonally adjusted main diffusion indices recorded expansion for the sixth consecutive month, although only deliveries (55.7) and finished stocks (54.5) displayed a higher result than December. Production (51.5) experienced its lowest value since June 2007, and the second lowest January result on record. Employment (51.2) was largely unchanged from December, while new orders (54.1) were at its lowest level since April 2006.
Unadjusted results for the various manufacturing industries were mainly showing declines during the first month of 2008. The food, beverage & tobacco sector (52.8) continued to lead the way, although significantly down from the December result. In contrast, the metal product sector (47.6) remained almost unchanged from last month’s result, while the petroleum, coal, chemical &associated product sector (48.7) experienced a decline for the first time since April 2007.
PMl results are available on www.businessnz.org.nz under ‘PMI Reports’. The Bank of New Zealand - Business NZ PMI (performance of manufacturing index) 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. The survey is sponsored by Bank of New Zealand Ltd.