Manufacturers a Hardy Bunch - Positive End To 2006

Manufacturers a Hardy Bunch - Positive End To 2006

Manufacturing had a positive level of activity at the end of 2006, according to the Business NZ Performance of Manufacturing Index (PMI).

Although December’s seasonally adjusted PMI, at 54.2, was down 0.9 points from November, results over the last quarter displayed the most consistent level of positive activity since late 2004.

Business NZ Chief Executive Phil O’Reilly said the strong result, in the context of a high and volatile NZ dollar, indicated that manufacturers were learning to live with exchange rate issues.

“If Kiwi manufacturers can cope with the dollar up around US70c, they are a hardy bunch,” Mr O’Reilly said.

December’s score of 54.2 compares favourably with the PMI value for December 2005 (48.5), and is reasonably consistent with PMI values for December in 2002-2004 at 57.3, 54.9 and 59.0 respectively.

In December 2006 all five seasonally adjusted main diffusion indexes recorded expansion for the third consecutive month. The last time this occurred was late 2004/early 2005. Almost all the indexes had a similar level of activity to November’s, with the only exception of production, which fell to 55.9 in December after sitting at 58.5 for two months. The highest value for December was new orders (56.4), while employment (50.8) continued with weaker signs of expansion.

As in October and November, unadjusted activity in December was expansionary across the country. However, the majority of expansionary activity was concentrated in the South Island, with the Otago/Southland and Canterbury/Westland regions displaying almost equal results (59.5 and 59.4 respectively). The Northern (51.8) and Central (50.4) regions also displayed a similar level of activity, although both down from the above-60 results in November.

After a preponderance (57.1%) of positive comments in November, the share of positive comments from manufacturers settled back to historical levels in December (50% positive / 50% negative).

The end of the year is a seasonal shut-down for many firms, reducing revenue-earning days. But the Christmas period continues to give some firms a boost in sales: roughly a quarter of respondents reporting positive activity mentioned the Christmas/holiday season, with comments such as “a traditionally busy period of the calendar year.” In addition, a few comments from manufacturers have already centred on the positive start to 2007, pointing out that “the year has started busy”.

ENDS

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