PMI slips in April as Australian weakness weighs on manufacturers

Thursday 14th May 2015

New Zealand manufacturing activity fell for the second consecutive month in April, while still remaining in expansion, as slowing economic growth in Australia weighed on trans Tasman firms.

The BNZ BusinessNZ performance of manufacturing index fell to a seasonally adjusted 51.8 from 54.6 in March. The index has been in expansion, at a level above 50, for 30 consecutive months on a seasonally adjusted basis.

"Although the proportion of negative comments for April (43 percent) did not increase by a significant proportion from March, there was a distinct pattern of respondents mentioning the current economic situation across the ditch," said Catherine Beard, executive director of Manufacturing NZ. "Some outlined the high value of the New Zealand dollar relative to the Australian, while others mentioned the general lacklustre Australian economy causing lower demand for New Zealand products."

Last month, the kiwi dollar climbed above 99 Australian cents, to nearly reach parity with its trans Tasman counterpart. The winding down of Australia's mining boom, on the back of a slump in iron ore prices its biggest export commodity, as well as the strength of the local currency had weighed on demand for New Zealand products, the manufacturers said in the survey.

The kiwi dollar has since rapidly retreated nearly 7 cents from its highs, which may see a pick up in the index over the coming months, BNZ senior economist Doug Steel said.

Of the five diffusion indexes that make up the PMI, four fell with new orders sinking to a barely positive reading of 50.4 last month, from 55.8 from March. Deliveries dropped to 52.2 from 54.6 and finished stocks slipped to 52.7 from 52.8. Production declined to 52.2 from 55.1. Employment rose to be back in expansion with a reading of 51 from 49.8 in March.

BusinessDesk.co.nz

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