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Manufacturing stats show lift in December auguring well for GDP

Thursday 8th March 2018

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A lift in the volume and value of New Zealand manufacturing sales in the fourth quarter of 2017 helped solidify economists' views for a solid reading in next week's gross domestic product figures. 

The volume of all manufacturing sales rose a seasonally adjusted 1 percent in the three months to Dec. 31 while the value increased 2.8 percent, Statistics New Zealand said. Seven of the 13 manufacturing industries reported increases in the December 2017 quarter. 

"It was broadly in line with our expectations and doesn't alter our view on the GDP outlook for the quarter,"  said ANZ Bank New Zealand senior economist Phil Borkin.  "Overall, the manufacturing sector is chugging along."

ANZ is expecting next week's figures to show the economy expanded 0.7 percent in the quarter. Gross domestic product figures are due March 15. 

ASB Bank expects GDP expanded 0.8 percent on the quarter although senior economist Jane Turner said the data - outside of primary manufacturing production indicators - points to relatively flat manufacturing production. 

The Stats NZ survey showed the value of petroleum and coal product manufacturing rose 23 percent and volumes rose 17 percent. Petroleum and coal product manufacturing does not have stable seasonality so is not seasonally adjusted. 

"The December 2017 quarter's rise in petroleum and coal product manufacturing follows falls in the June and September quarters," Stats NZ manufacturing manager Sue Chapman said. "This is the largest percentage rise since December 2008, and the third-largest since the series began." 

Stats NZ noted it was not unusual for this industry to show large movements from quarter to quarter. The predominant activities in the industry include automotive fuel manufacturing, aviation fuel manufacturing, oil manufacturing, and petroleum refining and blending.

Meat and dairy product manufacturing, which accounts for almost a quarter of production, reported a 2.8 percent decline in sales volumes in the quarter, while sales values lifted 3.9 percent. On an unadjusted basis, sales volumes rose 38 percent from the prior quarter while values jumped 45 percent.

ANZ's Borkin said the decline was not a surprise as dry weather in the quarter hampered milk production. 

The actual volume of total manufacturing sales was up 1.4 percent from the previous December quarter. When price changes are included, the value of manufacturing sales was $29.6 billion in the December 2017 quarter, up $2.7 billion from the December 2016 quarter.


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