Healthy start for manufacturing in 2007

16 February 2007

Healthy start for manufacturing in 2007

Manufacturing is off to a healthy start in 2007, according to the Business NZ PMI (Performance of Manufacturing Index). January's seasonally adjusted PMI, at 56.0, was up 1.7 points from December, continuing the trend over recent months of steady expansion.

PMI values for January in the years 2003-2006 were 56.1, 55.9, 57.1 and 48.6 respectively. (A PMI reading above 50.0 indicates that manufacturing is generally expanding, while readings below 50.0 indicate decline.)

Business NZ Chief Executive Phil O'Reilly said the early results were encouraging, with positive levels of new orders and strengthening demand. "The high New Zealand dollar remains a concern, but manufacturers are continuing to display resilience in the face of exchange rate changes," he said.

All seasonally adjusted main diffusion indices showed expansion for the fourth consecutive month. Most recorded levels of activity similar to previous months, with the only exception being deliveries of raw materials (59.2), which showed a strong lift in activity from December. Deliveries (deliveries of finished product) also recorded the highest value for the month - the first time since August 2005.

Unadjusted activity in January was expansionary and consistent across most of the country. The Canterbury/Westland region had the highest activity levels in January (53.7), closely followed by the Central (52.6) and Northern (51.6) regions. Otago/Southland (43.4) was the only region to experience a drop in activity, after leading regional activity for most of 2006. This however is consistent with the early part of previous years, with the decline in January 2006 (42.8) even more marked.

Although overall the seasonally adjusted PMI value was the highest since October 2006, the balance of comments from manufacturers continues to tilt towards the negative. For January, the proportion of positive comments stood at 45.5%, down from 50% in December and 57% in November.

The most common issue is still the high New Zealand dollar (noted by 28% of those mentioning negative influences), followed by the summer holiday period (21%). Some felt the holiday period had had a stronger impact this year, with comments such as "Christmas shutdown period seems to have extended longer this year" typical of some manufacturers. Meanwhile, those discussing positive influences typically mentioned a stronger demand for products.

ENDS

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