New Zealand's manufacturing activity slips in January

Friday 17 February 2017 11:28 AM

New Zealand's manufacturing activity slips in January

By Rebecca Howard

Feb. 17 (BusinessDesk) - New Zealand's manufacturing activity slipped in January from December and there may be further headwinds to come as the building sector's momentum loses some of its 'oomph'.

The Bank of New Zealand-BusinessNZ performance of manufacturing index was a seasonally adjusted 51.6 in January, 2.6 points lower than December, and the lowest level of expansion since January 2015.

The manufacturing sector has remained in expansion in almost all months since October 2012, barring a blip in January last year when the PMI slipped into contraction with a reading of 49.8. The economy has been buoyed by a construction boom that started in the post-earthquakes Christchurch rebuild and has extended to Auckland's housing market.

BNZ senior economist Craig Ebert said the slowdown was mainly due to a marked slowdown in the production index "which dampens expectations of a big bounce in the PMI over the short term."

Ebert said much of the weakness was in areas such as textile, clothing, footwear and leather, wood and paper products and printing, publishing and recorded media. However, he also sounded a note of caution regarding manufacturing's dependence on the local construction cycle as some building indicators have "lost oomph" over recent months, with December new dwelling consents falling for the second month in a row while the rebuild in Canterbury is maturing.

"If construction's strong run is tiring then it will remove a tailwind the local manufacturing industry has enjoyed for a good few years now," Ebert said.

New Zealand's domestic manufacturing sector is typically linked to construction and the Canterbury rebuild revived the sector when manufacturers went through a period of contraction following the global financial crisis and local finance sector collapse.

Today's figures show the PMI's production sub-index sagged to 51.1 versus 56.9 in December. Employment dipped to 51.5 versus 52.0 in the prior month, new orders were virtually unchanged at 52.5 versus 52.4. Finished stocks were 50.4 versus 51.7 while deliveries dipped to 53.2 versus 54.4.

(BusinessDesk)

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