Manufacturing expansion lifts for June

Manufacturing expansion lifts for June

New Zealand manufacturing recorded increased expansion in June, according to the latest ANZ-Business NZ Performance of Manufacturing Index (PMI).

New Zealand's PMI value increased from 54.1 in May to 62.2 in June (a PMI reading above 50 points indicates expansion and below 50 indicates decline). This remains 9.0 points higher than June 2003, when a lift in activity from May to June was also recorded.

All five sub-indexes recorded expansion in June, led by new orders (67.7), which continues as the highest sub-index throughout 2004, indicating further expansion in the future. The production and deliveries of raw materials indexes also recorded strong expansion with values over 60, while the employment and finished stocks indexes experienced moderate expansion.

All regions continued to record expansion, with the Northern region indicating the strongest level, closely followed by Canterbury/Westland. The Otago/Southland region continued to record a stronger level of expansion, but was still 5.6 points lower than in June 2003.

The machinery & equipment sector noted a strong increase in orders during June, notably from overseas. A lack of raw materials was hindering the metal product sector from further expansion, and although the textiles, clothing, footwear & leather sector recorded overall expansion for June, comments reflected a seasonal fashion cycle as sales had dropped from May.

Export activity was generally positive across firms for June, with many reporting a pick-up in new orders from standard exporting countries such as Australia and the US, as well as emerging markets such as China. Increases in the cost of raw materials from abroad in the chemicals sector continue to be reported as concerns, while exchange rate growth had cooled off any further gains in exports for the wood & paper product sector.

Manufacturing Expansion Lifts

For The Month Of June 2004

The ANZ-Business NZ Performance of Manufacturing Index (ANZ-Business NZ PMI) is a monthly survey of the manufacturing sector providing an early indicator of activity levels. The ANZ-Business NZ PMI contains data obtained through Business NZ’s regional organisations: Employers’ & Manufacturers’ Association (Northern), Employers’ & Manufacturers’ Association (Central), Canterbury Employers’ Chamber of Commerce and Otago Southland Employers’ Association. When interpreting the data, a PMI reading above 50 points indicates manufacturing is generally expanding; below 50 indicates it is contracting; the distance from 50 indicates the strength of expansion or contraction.

KEY FINDINGS

The ANZ-Business NZ Performance of Manufacturing Index stood at 62.2 for the month of June. This was up 8.1 points from May and up 7.4 points from April. In comparison with June 2003 (53.2), the 2004 value showed much stronger activity, although a pick up in activity from May to June was also evident in 2003.

New orders (67.7) remained the strongest sub-index value for the eighth consecutive month. The other four sub-indexes also recorded higher activity from May to June, as the production index increased 8.0 points from May to stand at 63.6, while the deliveries of raw materials index rose 5.6 points to stand at 61.4. Finished stocks went from decline in May to expansion in June (55.8), while expansion in employment was recorded in June (56.0).

Activity by sector was expansionary for all industries during June, with some sectors recording a strong level of expansion. The machinery & equipment sector reached its highest point (70.3) since the survey began in August 2002, and was also the strongest sector result for June. The metal product sector also recorded strong activity (65.1), while the food, beverage & tobacco sector recovered from a slight decline in May to record a moderate level of expansion for June (56.1).

All four regions recorded expansion during June. The Northern region (63.6) recorded the highest level of expansion for June, closely followed by the Canterbury/Westland region (62.4). The Central region (60.8) recorded its highest level of expansion since November 2003, while the Otago/Southland region (56.1) continued to show higher activity levels after a lacklustre period earlier in the year.

All firms by size recorded higher values for June in comparison with May 2004 and June 2003. Small-to-medium sized firms (11-50 workers) recorded the highest level of expansion for the month (64.0). This was followed by micro firms (1-10 workers) on 61.8, and large firms (51-100 workers) on 60.8. Medium-to-large firms (101+ workers) rounded off the last group with a value close to 60 (59.4).

The machinery & equipment sector noted a strong increase in orders during June, notably from overseas. A lack of raw materials was hindering the metal product sector from further expansion, and although the textiles, clothing, footwear & leather sector recorded overall expansion for June, comments reflected a seasonal fashion cycle as sales had dropped from May.

Export activity was generally positive across firms for June, with many reporting a pick-up in new orders from standard exporting countries such as Australia and the US, as well as emerging markets such as China. Increases in the cost of raw materials from abroad in the chemicals sector continue to be reported as concerns, while exchange rate growth had cooled off any further gains in exports for the wood & paper product sector.

PRODUCTION

The ANZ-Business NZ production diffusion index stood at 63.6 for June. This was 8.0 points higher than May and 12.2 points higher than in June 2003. The June production result was the highest for 2004 so far.

The machinery & equipment sector (72.5) recorded the strongest level of expansion in production during June, followed by strong activity in the metal product sector (68.8).

The Canterbury/Westland region (68.2) recorded the highest level of expansion of the four regions after consecutive falls in expansion for April and May. The Northern (64.2) and Central (63.5) regions also recorded strong growth, while the Otago/Southland region experienced no change (50.0).

EMPLOYMENT

The ANZ-Business NZ employment diffusion index (56.0) experienced moderate growth in June after recording declines and sluggish expansion for the previous six months. The June 2004 result was also higher than that recorded in June 2003.

Employment activity levels were generally mixed across sectors. The machinery & equipment sector (67.4) had the highest level of expansion, followed by the food, beverage & tobacco sector (58.3).

The Northern region (58.4) was close to recording its highest level of expansion for employment activity since the survey began. The remaining three regions all recorded similar expansion levels, ranging between 52.3 and 54.2.

NEW ORDERS

The ANZ-Business NZ new orders diffusion index (67.7) remained the highest value of the five diffusion indexes for June. The June value was 9.5 points higher than May and 14.0 points higher than June 2003.

The machinery & equipment (73.2) and metal product (72.7) sectors both recorded a very high level of expansion. Most other sectors also experienced strong expansion.

The level of expansion in new orders was fairly close throughout the regions. The Otago/Southland region (68.8) recorded the highest level of expansion, closely followed by the Northern (68.4), Central (66.9) and Canterbury/Westland (65.9) regions.

FINISHED STOCKS

The ANZ-Business NZ finished stocks diffusion index increased 7.4 points from May to stand at 55.8 for June, indicating a moderate expansion in finished stock levels. This is 1.2 points higher than June 2003, and the strongest level of expansion since October 2003.

Expansion in finished stocks was recorded in five sectors, led by the machinery & equipment sector (60.9). The food, beverage & tobacco sector recorded the only decline (48.3).

Canterbury/Westland (58.0) recorded the strongest expansion in finished stocks, while the Central and Northern regions recorded similar values of 56.8 and 56.6 respectively. The Otago/Southland region recorded a decline for the fourth consecutive month (43.8).

DELIVERIES

The ANZ-Business NZ deliveries of raw materials diffusion index increased 5.6 points from May to stand at 61.4 for June 2004 and 6.2 points higher than June 2003.

Sector results were positive throughout. The strongest expansion was in the machinery & equipment sector (71.0), while the lowest was for the food, beverage & tobacco sector (51.7).

Deliveries of raw materials were strongest in the Northern region (64.5), followed by the Canterbury/Westland region (62.5).

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