Moderate manufacturing expansion in May

New Zealand manufacturing continues to be in expansionary territory for May, although it has eased back slightly from the April expansion, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for May stood at 54.5, which is still solid expansion, but down 4.1 points from the expansion seen in April. The continued expansion is the ninth consecutive month of expansion, and is very much in keeping with the results from other international manufacturing indexes, which have also seen continued expansion but an easing off from the highs of April.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. The May 2010 result was the fourth consecutive month that all the main indices (production, new orders, finished stocks and deliveries) were in expansionary mode, apart from employment, which eased back into slight contraction (49.3).

BusinessNZ’s executive director for manufacturing Catherine Beard said that the New Zealand results show a continuing solid performance from the manufacturing sector.

“The expansion in the sector seems to be steady and solid and we are in a much better place than we were in one year ago. Hopefully we have turned a corner and have left the last two years behind us, where the results were showing contraction for month after month. This is much more positive territory, though the comments from manufacturers show that they are not all ‘out of the woods’ yet.”

BNZ senior economist Craig Ebert said the bumpy road to recovery is as expected. The first quarter’s statistics for the economic survey of manufacturing were a little disappointing, however dairy and meat processing had the biggest influence on this.

“Overall, manufacturing sales volumes dipped 2.7 percent. However, this reflected a 10 percent drop in agricultural products, with the rest of manufacturing expanding real sales by 2.7 percent.

“Of course there’s more to it than this. The details have become very mixed at present, and likewise the global markets are also reassessing their degree of optimism. While the fundamental path remains one of recovery there are likely to be more bumps ahead.”

Unadjusted results by region showed all were in expansion during May, apart from Northland (48.3). Leading the regions was Otago/Southland (58.5) followed by the Canterbury region (57.6) and the Central region (52.3).


Click here to view the May PMI
Click here to view the time series data