Manufacturers end 2011 on high note
BNZ-BusinessNZ performance of manufacturers index increased 5.9 points from last November to December.
Thursday, January 26 2012 || News || BY Hamish Rutherford, Businessday.co.nz
The BNZ-BusinessNZ performance of manufacturers index (PMI) stood at 51.9 points in December, a 5.9 point increase on November. Any figure above 50 shows the index is expanding, below 50 represents a contraction.
While the survey's authors said the result did not represent a significant expansion, it was the strongest reading since August, and came after two months of decline.
There were wide variances between industries. The food, drink and tobacco sub-group showed a reading of 60.7, the third time in four months it has been above 60, signalling strong production in the farming sector. Petrol, coal, chemical and associated products showed a reading of 54.1 while metal product manufacturing showed another decline, at 43.4.
Otago/Southland was by far the strongest region at 65.6, even though this was below November's figure, followed by Canterbury/Westland's 54.2. Northern, which covers the upper half of the North Island, grew slightly at 51.9 while Central fell to 42.7, the lowest figure since April 2011.
BNZ economist Craig Ebert said there were signs that manufacturers had built up too much stock late last year - a factor likely to cut production growth temporarily. However, last week's quarterly survey of business opinion from the NZIER showed that while domestic demand was weak, exports had held up thanks to a still-strong Australian economy.
Ebert said this was heartening for the sector, with 41 per cent of New Zealand's machinery products going to Australia, and around 70 per cent of the clothing and footwear exports. Kiwi manufacturers were also being given a boost by the exchange rate against the Australian dollar, which at 77c is around 10 per cent below what BNZ believes to be fair value.
''Sure, the Australian economy has slowed. However, it is doing better than most, and is expected to expand 3.4 per cent this calendar year and 3.3 per cent in 2013.
''These are close enough to trend rates these days. And with a heavy emphasis on capital investment and engineering work it's not hard to imagine NZ manufacturers getting a slice of this action.''
