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Manufacturing Activity Shaken by Christchurch Earthquake

( Manufacturing activity has been shaken over the last couple of months, but is still keeping its head above water, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for March stood at 50.1, down from 52.6 in February and 53.2 in January (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Only two of the five indices – employment (53.2) and production (50.4) – remained in expansion for March.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the recent tragic events in Christchurch were always going to have a knock-on effect for various sectors, including manufacturing.

“The data shows a clear distinction between the two islands in terms of performance. While the Northern and Central regions remain in expansion, the Otago/Southland region has also taken a considerable hit in activity levels, although obviously not to the same degree as the Canterbury/Westland region. On a positive note, comments by various respondents who are currently experiencing an upswing in business have pointed out increased orders from Australia as a key reason for growth”.

“Looking forward, the fact that new orders contracted in March does not bode well for future production levels. Whether the sector falls back into overall decline will most probably depend on the relative movements of domestic versus offshore orders in the coming months”.

BNZ senior economist Craig Ebert said the March PMI was extremely mixed across industry-type as well as just geography.

“The stalling in the March PMI, from its robust reading early this year, was understandable, as it is the first survey post February’s devastating earthquake. However there are diverging trends by industry also, which makes interpretation very difficult.

“Despite this there still remain enough positive aspects, including robust employment intentions and the rebound of dairy industry output, to suggest the manufacturing will continue to recover, overall, having rebounded well in Q4 of last year.”

Unadjusted results by region showed a clear distinction between the two islands given the flow-on effects from the recent earthquake. Both the Northern (52.4) and Central (53.1) regions showed steady levels of expansion, while the Canterbury/Westland (42.0) and Otago/Southland (44.3) regions both experienced low levels of activity. The result for the Canterbury/Westland region was the lowest since March 2009.

Media Release 14 April 2011 from Business NZ.



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