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NZ manufacturing expanded last month on production, new orders: PMI

Thursday 11th February 2010

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New Zealand manufacturing continued its expansion in January, led by increases in production and new orders, suggesting the economy’s modest recovery is extending into the first quarter.

The BNZ-Business NZ Performance of Manufacturing Index fell 1 point to 52 last month, seasonally adjusted, having touched a two-year high of 52.9 in December. It held above 50 – the cut off point between expansion and contraction – for a a fifth straight month. Production weakened from 54.1 to 52.3 and new orders slipped from 57.2 to 56.2.

The monthly series comes at the start of New Zealand’s reporting season, amid expectations companies struggled to lift earnings in the six months through Dec. 31 as the economy tentatively emerged from recession. Reserve Bank Governor Alan Bollard has reiterated he doesn’t plan to raise interest rates until at least the middle of the year and says sectors such as housing haven’t bounced back as much as feared.

The January manufacturing survey exhibits “the classic signs of a sector in the early stages of recovery,” said Doug Steel, an economist at BNZ. “Sustained new orders and production from here would likely see employment growth by mid-year.”

Three of the five main diffusion indexes registered a contraction in the latest months. Employment improved to 49.6 from 48.7 in December, deliveries of raw materials shrank from a two-year high of 52.9 a month earlier to 49.3, and finished stocks slipped from 47.5 to 46.9.

New Zealand’s PMI continued to lag behind the JPMorgan Global PMI in January, which reached 56.1, the highest in 5 ½ years. The U.S. PMI climbed from 55.9 to 58.4  and the Australian PMI moved back into expansion from 48.5 in December to 51.

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