NZ manufacturing activity rises in April led by new orders, production

Thursday 12th May 2016

New Zealand manufacturing activity rose in April, after two months of slowing growth, led by new orders and production, while employment contracted for a third month.

The BNZ-BusinessNZ performance of manufacturing index rose to a seasonally adjusted 56.5 last month from 54.7 in March. A reading of 50 separates expansion from contraction.

The nation's manufacturing sector has been expanding since October 2012 and has held above its long-term average for the past 11 months, which Bank of New Zealand economist Doug Steel said was underpinned by rapid, migrant-driven population growth, a tourism boom, elevated construction activity, low interest rates, rising asset prices, and a robust labour market. Much of that strength was also expected to be reflected in first-quarter retail sales data released tomorrow, a trend expected to continue into the second quarter, he said.

"The bounce in April not only arrests that previous mild momentum loss but affirms the underlying above-average growth pulse that the manufacturing sector has displayed for many

months now," Steel said.

The PMI showed the measure of production rose to 57.9 last month from 55 in March and new orders rose to 60 from 58.2. Finished stocks fell to 53.7 from 55.3 and deliveries rose to 56.8 from 51.9. Employment remained the laggard, improving to 49.5 from 48.6.

Steel said even though the PMI was healthy overall, it may be looking "a bit soft" in terms of gross domestic product in the near term.

He said the caution came mainly from other indicators of the food-processing industry, especially a drop in meat processing in the first quarter, which followed "an earlier surge likely associated with meat pricing, an elevated dairy cow cull, and most importantly weather risks at the time."

The volume of meat processed in the first quarter was down 10.9 percent from the same quarter last year and dairy product had also been subdued, he said.

The food, beverage and tobacco PMI index slowed to 52.0 in April, its lowest April reading since 2000.

BusinessDesk.co.nz

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