Time to go steady

14 July 2011

Time to go steady

Activity in the manufacturing sector for June saw an ongoing and steady level of expansion, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for June was 54.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was slightly down on the May result of 54.7, combined it was the strongest two months of manufacturing activity since early 2010.

BusinessNZ's executive director for manufacturing Catherine Beard said that part of the relative positive and steady result for the last two months can be attributed to our Trans-Tasman cousins.

"Many of the positive comments by manufacturers have centred on increased orders and sales from Australia given the competitive exchange rate at present. While issues such as the ongoing effects from earthquakes and the economic downturn are still mentioned, the Australian situation is as least providing a valuable market opportunity for businesses looking to broaden their sales base."

BNZ economist Doug Steel said that there seemed to be plenty of reasons for the rate of manufacturing expansion to cool a bit in June, but it didn't.

"This is fundamentally encouraging. Export growth is holding up despite its many threats, including the strength of the currency, and domestic manufacturing sales look likely to strengthen with the wider economic recovery we foresee. All up, this survey gives a sense of sure and steady improvement."

Four of the five seasonally adjusted main diffusion indices were in expansion during June, with deliveries (56.1) again leading the way, followed by new orders (55.6) and production (52.4). Employment (51.7) experienced its second consecutive increase in expansion, while finished stocks (48.4) continued to slip lower.

Unadjusted results by region showed three of the four main regions in expansion, with the Northern region (55.2) leading the way, followed by the Central region (53.9). The Canterbury/Westland region (53.9) dropped 5.6 points from May, although encouragingly remained in expansion. In contrast, the Otago/Southland region (41.3) sunk deeper into contraction during June, with five consecutive months in contraction.

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