Manufacturing expansion gains further foothold in February

Ongoing strength in new orders meant manufacturing remained in positive territory for the second month of 2010, according to the BNZ - Business NZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for February stood at 53.3. This was up 1.2 points from January, showing slow but steady improvement.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining.

Business NZ’s executive director for manufacturing Catherine Beard said while New Zealand manufacturers were still making more cautious comments than positive in the survey feedback, the continued increase in new order numbers was encouraging as was the fact that all the diffusion indices, including employment, were now in positive territory.

“After six months of solid, if not spectacular expansion, we have now reached a phase where monthly results are consistent, and new orders continue to drive activity, which we would hope will flow through to increasing employment if the trend continues.”

BNZ Head of Research Stephen Toplis said the latest data support the optimism of last month’s PMI and the bank’s belief that the broader economic environment is improving.

“The future is looking brighter for manufacturers’ supply into the domestic market. At face value, household spending seems like one of the weaker links, but we believe it’s on a slow trend improvement as stock-to-sales ratios continue to decline.

“Residential construction is also on the improve, largely driven by strong net migration inflows. However there is no evidence that non-residential will follow suit.

“But the really positive news for manufacturers continues to come from the export sector, with dairy, wood and fuel exporters doing particularly well. Our trading partner growth, heavily influenced by Asia and Australia, is expected to show relatively strong expansion over the next three years.”

In terms of regional performance, the unadjusted results show all regions in decline, apart from Canterbury (59.2), which is taking the lead with an increased expansion of 9.5 points ahead of last month.

The category of manufacturing sub groups that were in expansion in February included metal product manufacturing (54.9), machinery and equipment manufacturing (52.4), with employment in the metal product manufacturing category also in expansion.


Click here to view the February PMI.
Click here to view the Time Series Data.