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New Zealand manufacturers still struggling

Article – BusinessDesk

New Zealands manufacturing activity shrank for a third month in September as production hit its lowest level in more than seven years.

New Zealand’s manufacturing activity shrank for a third month in September as production hit its lowest level in more than seven years.

The Bank of New Zealand-BusinessNZ performance of manufacturing activity was unchanged from August at 48.4 points, remaining below the 50 level that separates expansion from contraction.

“While it is good to see the sector not declining further, it remains stuck in a tight band of contraction,” said Catherine Beard, BusinessNZ’s executive director for manufacturing. “The key to lifting it back into expansion will be a sustained boost to both new orders and production in the months ahead.”

The latest PMI reading showed the production sub-index fell to 46.2 points from 49.2 in August. It was well below its long-term average of 53.9.

“With this, we should probably expect manufacturing activity to contract again in the 3Q GDP accounts, having done just that in 2Q,” said BNZ senior economist Craig Ebert.

“Having said this, if it’s a manufacturing recession then it’s an extremely mild one compared to what the industry went through in 2008/09.” It touched a low of 36.1 points in November 2008.

Gross domestic product expanded 0.5 percent in the three months ended June, following a 0.6 percent rise in the March quarter. It was up 2.1 percent from the same quarter a year earlier. Manufacturing activity fell 0.8 percent on the quarter, weighed down by a 2.8 percent contraction in food, beverage and tobacco manufacturing.

Today’s manufacturing report showed the finished stocks index fell to 48.8 points from 52.8 in August. Deliveries fell to 46.4 points from 47.9 in the prior month.

The employment measure just managed to expand at 50.0 points from 49.9 in August. New orders were also above the line for expansion at 50.1 points from 45.9 in August.

Ebert said both the PMI and the New Zealand Institute of Economic Research’s recent Quarterly Survey of Business Opinion paint a “broadly dour picture” around manufacturing. However, each of them also held “some hope that the worst might just be passing.”

The PMI’s new orders index has “recovered a semblance of stability” and the employment component has also lifted after being at 42.3 points in July.

In the case of the QSBO, while many of its activity indicators related to the prior three months were poor, expectations for the coming three months were, by comparison, relatively sound, he said.

Last week’s QSBO showed that manufacturers were still the most pessimistic of all sectors, even though their confidence lifted slightly.

ends

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