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Manufacturing expansion falters

13 October 2006

Manufacturing expansion falters

The rate of manufacturing expansion faltered in September, bringing results close to ‘no change in activity’, according to the Business NZ Performance of Manufacturing Index (PMI).

September’s seasonally adjusted PMI, at 50.5 was down 1.8 points from August, the lowest level of activity since January.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining.

PMI values for September in 2002-2005 were 58.2, 57.3, 54.5 and 50.0 respectively.

Activity was again positive for most regions, with the South Island regions continuing to experience higher levels of activity. The Otago/Southland region (60.6) led the way for the fourth month in a row, with levels similar to that of June 2006. The Northern and Canterbury/Westland regions (52.2 and 54.2 respectively) showed moderate expansion, while the Central region (50.0) showed no change.

Three of the five seasonally adjusted main diffusion indexes recorded expansion for September 2006. New orders (53.0) again had the highest value for the month, although well down on recent months. Finished stocks (51.0) and deliveries (51.6) showed slight expansion, while employment (47.8) continued to show ‘decline’ for the fourth consecutive month. Production (49.4) recorded its first decline - although minor - since January 2006.

The main 2006 September value, while still in positive territory, indicates a slight fall from the values recorded over most of 2006. Of particular concern are the decline in production activity and the fall in the level of expansion for new orders. Negative comments (59%) from respondents outweighed positive ones (41%), with continuing concerns about recent lifts in the NZ$.


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