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NZ manufacturing bounces back in September

Thursday 13th October 2016

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New Zealand manufacturing activity bounced back in September, lifting expansion levels after two consecutive months of softening expansion.

The Bank of New Zealand-BusinessNZ performance of manufacturing index rose to a seasonally adjusted 57.7 in September, from 55.2 in August and 55.6 in July. A reading of 50 separates expansion from contraction and the latest reading is above the long-term average of 53.2, and the highest level of activity in the sector since January this year.

New Zealand's manufacturing sector has been in continuous expansion since October 2012, except for January last year when it slipped into contraction with a reading of 49.8. The economy has been buoyed by a construction boom that started in the post-earthquakes Christchurch rebuild and has extended to Auckland's housing market.

In the latest monthly data, production accounted for the most rapid expansion with a reading of 61.3, up from 56.0 in July. Finished stocks gained 2.9 points to 54.5, new orders rose to 60.9 from 59.3 and deliveries advanced to 57.8 from 56.2. 

The September result is "verging on the very strong," Bank of New Zealand senior economist Craig Ebert said in his report, though he noted there is some "fraying at the edges."

"This was not so noticeable by region anymore, but large firms (45.0) were more clearly lagging the impetus that relatively smaller firms maintained in September," Ebert said. "By industry, three of the nine had results below the breakeven 50 mark, compared to two during August in non-seasonally adjusted terms."

The employment sub-indice, which had dropped to 47.1 in August, rebounded to 50.3 in September. 

"It was encouraging to see a bounce-back in the jobs index of the PMI," Ebert said. "This wasn’t a surprise to us as, like we noted last month, there hadn’t been any indication of sagging manufacturing jobs from other economic surveys. This remains the case. Indeed, manufacturing firms in the NZIER Quarterly Survey of Business Opinion signalled an intent to take on staff over the coming few months about as strong as it’s been in decades."

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