Manufacturing contraction deepens as production dips

Thursday 17th September 2009

New Zealand’s manufacturing industry contraction deepened last month, led by a drop-off in production, suggesting the sector still has a hurdle to clear inventory levels as the economy emerges from recession.

The BNZ Capital-Business NZ Performance of Manufacturing Index fell 0.9 points to 48.7 in August, extending the period of contraction to 16 months. Four of the five main seasonally adjusted diffusion indexes in the PMI shrank.

The PMI comes after government data this week showed manufacturing shrank 2.8% in the second quarter, excluding meat and dairy, underlining expectations the economy lurched into its sixth, and possibly final, quarter on contraction in the three months through June.

The economy shrank 0.4% in the second quarter, according to a Reuters survey, after a greater-than-expected 1% contraction in the first quarter.

“We don’t believe it spoils the recovery theme we’ve been promoting,” said Craig Ebert, economist at BNZ. Still, the August PMI “does sound a cautionary note not to get overly excited about a strong, or sustained recovery just yet.”

Production fell to 48.8 in August, after recording its first month of expansion since April 2008 in July, at 50.6. New orders slipped 50.3 from 55.4 in July, while holding above 50 for the third straight month.

Employment improved to 46.9 in August, the highest since May 2008, from 44.4. Deliveries of raw materials improved to 48 from 47.9 and finished stocks jumped to 48.7 from 42.7.

New Zealand’s PMI lags behind the JPMorgan Global PMI, which reached a 26-month high of 53.1 last month. The US PMI reached 52.9, the highest since June 2007, and the Australian PMI marked its first expansion in 15 months, at 51.7.

Businesswire.co.nz

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