April shows slight upturn in manufacturing activity

Media release

12 May 2011

April shows slight upturn in manufacturing activity

Despite recent shocks to the economy, manufacturing has continued its run of expansion, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI) .

The seasonally adjusted PMI for April was 51.5, up from 50.2 in March but still lower than the four month period of values at 53 between November to February (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Four of the five indices were in expansion for April, compared with two in March.

BusinessNZ's executive director for manufacturing Catherine Beard said despite the recent tragic events in Christchurch there were a number of positive outcomes for the sector.

"Looking at the main sub-indices, new orders, finished stocks and deliveries of raw materials all improved from March. However, one obvious negative outcome of the April results involved more regions falling into decline and the Northern region alone showing strong results.

"Comments from respondents were still heavily focused on the Christchurch earthquake. However, the proportion of negative comments fell back significantly for April, with some businesses mentioning the earthquake as a primary reason for increased business activity."

BNZ economist Doug Steel said the April PMI was encouraging, building on the already above-breakeven reading recorded in March.

"Fortunes are diverse across the manufacturing sector at present, given a raft of strong and competing influences. Pulling the threads together we find a sector that, on average, is still pushing forward - not fast expansion, but heading in the right direction."

"The outlook is brighter, with many awaiting a lift in construction activity from its current very low ebb. Encouragingly, some leading indicators are starting to point in the right direction suggesting acceleration in manufacturing activity over the next year or two."

Unadjusted results by region showed that the clear distinction between the two islands in March had now wavered, with the Central region (40.9) experiencing its lowest level of activity since May 2009. This was mainly due to very low new orders and production levels. Both the Canterbury/Westland (47.8) and Otago/Southland (47.2) regions experienced a relative improvement from March, although both regions were still in decline. The Northern region (56.7) continued to show improvement, with its highest result since November 2010.

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