Manufacturing activity picks up

Media release
August 16, 2007

Manufacturing activity picks up

The level of expansion in manufacturing bounced back in July, according to the Business NZ Performance of Manufacturing Index (PMI). July’s seasonally adjusted PMI, at 54.6, was up 4.0 points from June, and generally in line with results recorded over the last nine months.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for July in 2003-2006 were 53.1, 59.0, 49.6 and 53.8 respectively. Over the entire five-year history of the survey, the national PMI value has ranged between 44.9 and 61.9, with an average value of 54.5.

Business NZ chief executive Phil O’Reilly said the July value was a welcome result after the dip in expansion the previous month.

“The drop in expansion in June was largely due to a sharp decline in production. However, the July result showed production rebounding to a healthy level. Overall, the manufacturing sector continues to remain in expansion mode, despite recent record high levels of the New Zealand dollar. Far from being on a path of terminal decline, the sector has now experienced continued expansion for the last 18 months.”

Looking at all the seasonally adjusted main diffusion indices, four out of five recorded expansion for the current month. New Orders (56.7) continued to exhibit the strongest level of expansion, followed by deliveries (55.8). Employment (49.5) continued to show a decline, albeit at a minor level.

Unadjusted activity in July showed most regions in expansion. Both the Northern and Central regions showed almost identical levels of activity (54.5 and 54.4 respectively) to lead the index. Both South Island regions also showed similar results, with the Canterbury/Westland region (50.9) still managing to show slight expansion, whereas the Otago/Southland region (49.0) continued to show a small decline.

The proportion of negative comments stood at 64%, largely the same as May and April. Despite the recent extreme high values of the New Zealand dollar, the proportion of manufacturers who provided negative comments mentioning the current exchange rate dropped from 44% in June to 36% in July. Regarding positive comments, most again involved increased orders (some from offshore), along with some firms contributing new products to the market.

Click on the following links to view the July PMI and the seasonally adjusted time series.

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PMl results are available on www.businessnz.org.nz under ‘PMI Reports’. For more information or assistance with data interpretation, contact Stephen Summers, ph 04 4966564, ssummers@businessnz.org.nz. The Business NZ PMI (performance of manufacturing index) draws on the depth of member companies associated with Business NZ: Employers and Manufacturers Association (Northern), Employers and Manufacturers Association (Central), Canterbury Employers’ Chamber of Commerce and Otago Southland Employers Association.

ENDS

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