Friday 16th March 2018
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New Zealand's manufacturing activity slowed in February as an early livestock cull last year weighed on primary production at the start of 2018.
The Business NZ-BNZ performance of manufacturing index fell to a seasonally adjusted 53.4 in February from 54.4 a month earlier, remaining above the 50 level separating expansion from contraction. Four of the five sub-indices increased, with just finished stocks falling 1 point to 51.1. Production rose 0.4 of a point to 53.9, employment gained 3.3 points to 54.8, new orders returned to an expansionary 54.8 from 49.7 and deliveries also crossed back into positive territory with a reading of 52.7 from 49.8.
"The generally slower PMI suggests we shouldn't expect Q1 manufacturing GDP to be much different from the flat result recorded in yesterday's official figures for Q4," Bank of New Zealand economist Doug Steel said in a note. "Early livestock culling on account of adverse weather seemed to boost Q4 manufacturing activity but will have the opposite effect through early 2018 given New Year rains."
Government data out yesterday showed New Zealand's manufacturing production shrank 0.1 percent in the December quarter following a 0.7 percent expansion in September, with the wet spring followed immediately be a drought weighing on the agricultural sector and sapping food processing.
Steel said the livestock cull is also showing signs of seeping into this year's production with lamb processing down about 3 percent from a year earlier and the cattle cull 17 percent lower than in 2017.
"It all suggests primary processing will be a drag on manufacturing activity early in 2018," he said.
Business NZ manufacturing executive director Catherine Beard said the pace of expansion had levelled off in recent months, and while the number of positive comments from respondents outweighed negative at 51.4 percent, a number "noted the sluggish start to the year with a dip in new orders being a common message."
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