Turning the corner?

Manufacturing activity experienced a sizeable lift in activity for February, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for February was 57.7 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 50.8 in January and the highest monthly value since April 2010. The February 2012 result was also the highest February value for activity since the survey began in 2002.

BusinessNZ's executive director for manufacturing Catherine Beard said that the strong upturn in activity for February was welcome, but whether this indicates a true turn around in the fortunes of the manufacturing sector remains to be seen.

"There's no doubt that after four months of lacklustre results, February's main value is a return to the levels of expansion consistently seen in the first three years the survey was running. Also, the fact that the key sub-indexes of production and new orders experienced a large lift is a good indicator for proper growth in the sector.

"However, with the global market still flat at best, we would be cautious at this stage to think the sector has turned any corner in terms of sustained growth."

BNZ economist Doug Steel remarked, "February's PMI result is one out of the box. A very strong reading with a lot to like in the details too. But it is only one month and in the context of a generally low level of manufacturing activity in recent years, we see it as early signs of growth off a low base."

Four of the five seasonally adjusted main diffusion indices were in expansion during February, led by new orders (63.1) and production (61.9) with both recording their highest results since 2004. Employment (51.3) was largely unchanged from January, as was finished stocks (49.0). Deliveries (54.0) increased 3.8 points from the previous month to record its highest level of activity since August 2011.

Unadjusted results by region showed that activity bounced back strongly in the North Island, but slipped in the deep south. The Northern region (53.0) rose 10 points from January, while the Central region (61.4) increased 15.5 points to its highest level since November 2007. While the Canterbury/Westland region (52.0) moved little from January, the Otago/Southland region (44.7) slipped to its lowest value since June 2011.