Manufacturing shrinks for nineth month

Thursday 12th February 2009

New Zealand manufacturing activity contracted for a nineth straight month, marked by dwindling production and new orders.

Manufacturing weakened by 0.5 point to 42 in January from December, according to the Bank of New Zealand-Business NZ Performance of Manufacturing Index. A reading below 50 indicates a contraction.

The survey highlights the impact of slowing world demand and a local economy the Treasury predicts has entered its fifth quarter of recession. Fletcher Building today posted a 27% drop in first-half profit and chief executive Jonathan Ling said "extremely tough" trading conditions are likely to continue in 2009.

All five of the seasonally adjusted diffusion indexes in the PMI were in contraction in January, according to the survey. Production weakened to 39.3 from 39.9 in December, having sunk as low as 29.3 in November. New orders fell to 40.8 from 42.2 and employment improved to 43.6 from 41.9.

Finished stocks fell back into contraction at 48.8 from 50.5 and deliveries of raw materials weakened to 41.9 from 43.7.

Economists are predicting a worsening in economic indicators such as employment this year, with the jobless rate forecast to exceed 7%, from a five-year high of 4.6% in the fourth quarter of 2008.

The JPMorgan Global PMI for January picked up marginally to 34.9 from 33.2 in December, which was the weakest since the composite survey began in 1998. The PMI for the US revived to 35.6 from 32.4 while the Australian PMI lifted to 36.6 from 33.7.

By Jonathan Underhill

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