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"Worrisome' 2 ½ year low for manufacturing activity

Thursday 15th December 2011

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New Zealand’s manufacturing sector contracted for a second month in November, with activity at the lowest level since June 2009 reflecting a decline in production and new orders.

The Bank of New Zealand Performance Manufacturing Index for November fell to 45.7 from 46.6 in October, the third time a decline has been measured for the month.

A reading below 50 indicates contraction. The sector traditionally picks up in the lead up to Christmas, however a slow-down during the Rugby World Cup and reservations about the global financial outlook have contributed to its decline.

“The November PMI is worrisome, reflecting a combination of softening global demand for mental and an extremely weak domestic construction sector,” said Craig Ebert, senior economist at Bank of New Zealand.

“However, this is miles away from the GFC meltdown in 2008/09 and we remain hopeful that a pick-up in building activity and solid primary goods exports will support the sector through the 2010 calendar.”

Of the five diffusion indices in the PMI, production slipped the most to 43.6, followed by new orders on 45.8 and deliveries at 47.5.

Employment improved one point from October to 49.6 while stocks expanded, on 51.2.

The PMI comes ahead of gross domestic product figures for the third quarter, due out next week. A Reuters poll of eight economists’ forecasts says GDP will rise 0.8 percent in the third quarter from 0.1 percent three months earlier.

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