A rise in production, especially for Auckland and Otago manufacturers, points to a stronger factory sector in Q3

Content supplied by Business NZ

The manufacturing sector experienced its strongest level of activity for five months, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for August was 56.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).

This was 3.0 points higher than July, and means the sector has now been in expansion every month over the last two years.

BusinessNZ's executive director for manufacturing Catherine Beard said that the boost in expansion was welcome after four months of more moderate growth.

"The rise in August was mainly due to a lift in both production and new orders, while two of the other three sub-indices also showed improvement.  In fact, production was at its highest level since July 2013.

"The proportion of positive comments from respondents was at their highest level for a number of months (61.2%), which tended to center around steady rise in orders, seasonal activity, and positive results following promotional activity and specific projects being undertaken.

BNZ senior economist Doug Steel said "Today's PMI points to more production ahead, and suggests it won't be too long before we see the manufacturing sector bounce back from the Q2 softness."

Three of the four regions were in expansion during August.

In the North Island, the Northern region (60.6) showed strong growth with its first activity level over 60 for the first time since December 2013.

In contrast, the Central region (46.3) produced another contractionary result, which was largely on par with July.

In the South Island, the Canterbury/Westland region (54.7) rose 2.4 points, while the Otago-Southland region (57.9) went back into expansion after three consecutive months of contraction.

Manufacturing by industry sub-groups were mostly positive during August.

Petroleum, coal, chemical & associated product manufacturing (63.5) went back into strong expansion after a period of decline.

Machinery & equipment manufacturing (52.3) continued to experience expansion, although down on the level seen in July, while food, beverage & tobacco manufacturing (66.9) continued to expand at strong clip.

In contrast, metal product manufacturing (49.2) experienced its first level of contraction since December 2013.

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Here is a comparison of the manufacturing PMIs between countries using the Markit series.

PMI score over 50 represent expansion, under 50 represent contraction.