Manufacturing Sector Remains Flat

( September saw little change from August regarding activity in manufacturing, as the sector remains flat and unable to expand, according to the BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for September stood at 49.2, which was almost identical to the August result of 49.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). The PMI has averaged 53.3 so far for 2010, although the first half of 2010 averaged 55.1.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the flat patch New Zealand manufacturing is currently experiencing has now been mirrored offshore.

“The JPMorgan Global Manufacturing PMI stood at 52.5, which was a 14 month low, and well off the near six-year high experienced in April. Looking across the Tasman, Australia has also fallen under the 50.0 mark of no change, with a value of 47.3 in September.

“Despite not reaching expansion for the second consecutive month, there are still two positive results coming out of September. The first is that as predicted last month, the Canterbury earthquake appears not to have had an overly negative impact on manufacturing in the region, as overall activity was slightly up on August, and new orders in the region are strong. Also, new orders improved in the other regions, boosting the seasonally adjusted result back above 50.0 after consecutive months of declines.”

BNZ senior economist Craig Ebert said that while the overall result looked disappointing, the survey’s forward-looking details provide a sense of stability, even mild expansion.

“One of the strongest look-ahead encouragements is in staffing. While it’s only edging forward into expansion territory, this would not be happening if manufacturing firms were seeing the immediate weakness as the shape of things to come. This upbeat employment outlook is backed up by other labour market indicators, such as the Quarterly Survey of Business Opinion, as well as recruitment agencies’ reports.”

Of the five seasonally adjusted main diffusion indices, three were in contraction, with deliveries, production and finished stocks ranging in value between 47.1 and 47.9. Employment (51.7) recovered somewhat from its drop in expansion during August, as well as bring close to its value for September 2009 (51.4). New orders (50.3) recovered from two consecutive months of contraction, although still nowhere near the consistent level of activity experienced from November 2009 to June 2010.

Unadjusted results by region showed no significant change in activity levels for most regions. The Northern (53.7) and Canterbury/Westland (52.8) regions remained in expansion, with the later not showing any significant effects from the recent earthquake. The Central region (47.7) improved slightly from August, although remained in contraction for the current month. Otago/Southland (47.4) also experienced an improvement after a 3.6 point dip in August.

Media Release 14 October 2010 from Business NZ.