Manufacturing growth slides further

New Zealand’s manufacturing sector experienced a fourth consecutive slip in expansion as the sluggish start to the year continued, according to the Bank of New Zealand - Business NZ Performance of Manufacturing Index (PMI).



The seasonally adjusted PMI for February stood at 52.2, which was 1.0 point lower than the January result and below the PMI’s average value of 54.5 since the survey began in 2002.



A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for February in the years 2002-2007 have ranged from 51.7-56.8. Although all February months have shown expansion, the 2008 result was the second lowest February value, with the 2006 figure following on from a significant period of contraction for the sector.



Business NZ chief executive Phil O’Reilly said the slowdown for the domestic sector was mirroring offshore movements where the global manufacturing scene was feeling the effect of subdued economic expansion.



“The negativity amongst New Zealand’s manufacturers continues to deepen, with the exchange rate remaining a key obstacle to boosting activity.”



Mr O’Reilly says the key diffusion indices of production and new orders confirm the downturn in growth, with values for the two indexes during the first two months of 2008 similar to the listless period of activity for 2005/2006.



“The ongoing lacklustre results for the two North Island regions remains a concern, although it is pleasing to see manufacturing in the Canterbury/Westland region remains relatively strong.”



For the first time in eight months, not all the main diffusion indices recorded expansion. This was due to employment (48.3) contracting for the first time since June 2007. New orders (54.1) led the way for February, and remained largely unchanged from the previous month, however it was at its lowest level since March 2006. Production (51.6) was almost exactly at January levels, while finished stocks (53.9) and deliveries (52.7) both fell from January.



Unadjusted activity for February showed it was the South Island leading the expansion. The Canterbury/Westland region (57.0) rose in expansion for February, and led the way for the month. The Otago/Southland region (52.4) experienced its third consecutive drop in expansion, mainly due to a fall-off in production and employment. The two North Island regions continued to exhibit a decline, although not as pronounced as January. Both the Northern and Central regions stood at 48.9, with the third consecutive fall in activity for the latter.



Unadjusted results for the various manufacturing industries were a combination of contraction and expansion. The petroleum, coal, chemical & associated product sector (60.3) bounced back from the January decline to lead the way in February. 


Link to the time series data