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New Zealand manufacturing picking itself off the canvas

Thursday 15th April 2010

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New Zealand manufacturing is the healthiest it has been for over two years, as activity expanded across most regions, in turn reflecting a significant global manufacturing recovery.

The BNZ-Business N.Z. Performance of Manufacturing Index March figure increased 2.7 points from February to 56.3, with all five indices expanding. A PMI reading above 50 points indicates manufacturing activity is expanding.

Production at 59.4 was the highest value, new orders at 56.9 remains healthy, employment at 50.1 showed almost no change from February, finished stocks at 52.8 were in positive territory for the second consecutive time after a prolonged contraction and deliveries rose 3.4 points to 57 to stand at its highest since October 2007.

The survey reports that the proportion of negative comments took a significant dive to 43% from 66% in February. The comment focus was strongly on increased demand domestically and offshore.

BNZ Research head of research Stephen Toplis said the recent strength of the Australian economy, along with a strong Aussie dollar has been a boon to many kiwi manufacturers.

However, “the manufacturing sector was one of the hardest hit by the global and domestic recession,” Toplis said. “And even though the sector was by far the biggest positive contributor to overall GDP growth in the fourth quarter, keep in mind that, even after this expansion, the level of manufacturing activity is still more than 16% below its previous peak back in 2005. The improving signs should be seen in the context of still making up for lost ground.”

The manufacturing categories experiencing the strongest expansion included metal product manufacturing at 62.4 and machinery and equipment manufacturing at 58.1. The petroleum, coal, chemical and associated product sector was at 50.5, pulling itself out of the previous month’s contraction.

Canterbury led manufacturing’s regional expansion story at 58.6, though this was a dip on February’s figure. Both Northern with 57.8 and Otago/Southland with 57.5 experienced similar levels of expansion, and while the Central region at 49 remains in contraction, March’s figure was an improvement on February.

The JPMorgan Global PMI March figure was 65.7, a 70-month high as production and new orders picked up pace. The USA PMI at 59.6 was the highest since July 2004.

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