PMI: Production, new orders continue expansion

Media release
September 13, 2007

Production and new orders continue manufacturing expansion

The level of expansion in manufacturing continued upward in August, according to the Business NZ Performance of Manufacturing Index (PMI). August’s seasonally adjusted PMI, at 55.7, was up 0.9 points from July, and was the same as the May result.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for August in 2002-2006 ranged from 50.8 to 57.4. The result for August 2007 sits at mid range, while it was 1.2 points above the average of 54.5 over the entire five-year history of the survey.

Business NZ chief executive Phil O’Reilly said that recent values, including the August result, showed that despite issues manufacturers have had to deal with over the last 12 months, activity has been consistent and healthy “Both production and new orders have continued to show strong growth, which have been the contributing factors towards boosting expansion. Many manufacturers have been resilient in dealing with the issues of high exchange rates and a lack of skilled staff. While the New Zealand dollar has eased over recent weeks, ongoing decreases would provide further boosts for competitiveness” he said.

Looking at all the seasonally adjusted main diffusion indices, all five recorded expansion for the current month. Production (58.9) exhibited the strongest level of expansion, closely followed by new orders (58.1).

Unadjusted activity in August showed all regions having similar levels of expansion. The Canterbury/Westland region (59.3) regained its top position showing the highest level of expansion for the month, followed by the Central region (58.1). Both the Northern (56.8) and Otago/Southland regions (56.9) displayed similar levels of expansion.

The proportion of negative comments dropped considerably for August (54.7%), in line with the boost in overall activity. The level of the NZ dollar remains the primary issue for manufacturers, although the proportion who provided negative comments mentioning the current exchange rate dropped for the third consecutive month to 32.7% in August. There was a notable increase in staffing/employee issues in August, generally relating to staff performance issues and a lack of being able to attain specialised staff.

Click here to view the August PMI and here for the seasonally adjusted time series.

Five-year anniversary of the PMI

August’s result marks five years since the PMI was first published.

The monthly survey has become a leading indicator of manufacturing activity in the country since it was first published in August 2002. Closely based on PMI surveys in countries such as Australia and the US, it also provides a way of comparing ourselves with how other countries are performing.

It has achieved a high level of international recognition, with results featuring in the JPMorgan Global PMI.

Phil O’Reilly said the strength of the Business NZ PMI lies in the high numbers who respond to the survey – which its ensures credibility and reliability.

“Thank you to the hundreds of manufacturers who consistently take part in the survey each month.”

Movements in the index over its five-year history can be seen in the graph below.

Click to enlarge

ENDS

PMl results are available on www.businessnz.org.nz under ‘PMI Reports’.

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