Manufacturing activity edges lower but still expanding

NZPA

Thursday 14th July 2011

A measure of manufacturing activity edged lower in June but remained at modestly expansionary levels.

The BNZ-BusinessNZ seasonally adjusted performance of manufacturing index (PMI) was down 0.4 points from May to 54.3 last month. A reading above 50 indicates activity is expanding.

BNZ economist Doug Steel said the PMI had stood stout, despite plenty of reasons to cool a bit in June.

Top contender among those reasons was the soaring New Zealand dollar, with others including the latest wave of fear around the European debt crisis, and further signs of domestic slowdown in Australia and the United States.

The PMI performance in the face of those developments was more evidence to support the view of a decent core element to the expansion, which had now been under way for 10 consecutive months, Steel said.

Despite the issues confronting manufacturing, exports still seemed to be a net positive for the sector, although the strength of the NZ dollar was causing "great angst" for many manufacturers.

None of the manufacturers surveyed had mentioned the European debt crisis as a major issue, while they remained upbeat about Australia, despite clear indications of a slowdown in domestic demand indicators across the Tasman.

"So, while plenty of risks remain in the international marketplace there remains a sense of sure and steady improvement, at least on average, regarding recovery in the PMI survey," Steel said.

"But, it yet might be just a matter of time before the strength of the NZ dollar, the Australian domestic slowdown and European debt issues catch up with us."

At the same time, promising signals for demand and production growth ahead were coming from new order indicators, with a reading of 55.6 in the seasonally adjusted new orders diffusion index.

Comments from our readers

No comments yet