Thursday 16th October 2014
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New Zealand manufacturing accelerated in September, its fourth monthly increase after a mid-year lull, with a pick-up in agricultural production stoking activity in the food and beverage sector.
The BNZ-Business NZ performance of manufacturing index rose 1.1 points to 58.1 in September, and was up from 53.7 in the same month a year earlier. The index was at the highest point since March, and has been above 50, which indicates the sector is expanding, for 25 months.
Bank of New Zealand senior economist Craig Ebert said manufacturing activity is expected to rebound in the third quarter after a technical blip in agricultural processing in the second quarter.
"For all the valid concerns about dairy price levels, dairy production looked solid in Q3," Ebert said in his report.
Dairy prices rebounded from a five-year low at Fonterra Cooperative Group's online auction today. Prices had dropped by about half from a peak in February as a build-up in Chinese inventories and increased global supply sapped demand for locally produced milk products.
A strong New Zealand dollar has also kept a lid on export earnings, though a recent decline in the currency since July has offset some of that pain for exporters.
BNZ's Ebert said the weaker currency will help revenue for manufactured goods, through it will also increase import costs and make foreign currency dominated debt harder to service.
Today's PMI showed all five of the sub-indices were in expansion in September, led by deliveries at 62.4, its highest level since July last year, and new orders at 60. Production fell 1 point to 59.3, and finished stocks were at a record 58.1. Employment rose 2 points to 56.
Across the regions, Otago-Southland was at 65.4, followed by Northern at 58.9, Canterbury/Westland at 55.9 and Central at 53.5.
Food, beverage and tobacco manufacturing showed the strongest expansion at 70.9, with footwear and leather manufacturing at 59.9, and petroleum, coal, chemical and associated products at 59.3. Machinery and equipment manufacturing was at 50.8 and metal product manufacturing at 50.6.
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