Manufacturing sales, volumes dragged down by dairy, meat in September (Update 1)

Manufacturing sales and volumes were dragged down by a fall in meat and dairy product manufacturing in the September quarter, figures released by Statistics New Zealand show. (Update 1 includes economist comments.) Total manufacturing volumes fell by a seasonally adjusted 1.4% in the September quarter from June. However, excluding a 7.1% fall in meat and dairy manufacturing, volumes would have risen 1% over the quarter, Stats NZ said. Total manufacturing sales fell 5.1% (seasonally adjusted) over the quarter. Excluding the meat and dairy industry, values would have fallen only 0.8%, Stats NZ said. These manufacturing figures and house construction work figures also out today suggest the economy tracked sideways in the third quarter, pouring cold water on suggestions of a quick rebound accompanied by early hikes in the Official Cash Rate. Unadjusted figures show sales volumes in the September 2009 quarter were down 6.4% from the same quarter a year ago. This was worse than the 4.7% fall in June, but better than the 9.7% annual fall seen in December 2008. Unadjusted figures show sales values fell 11.8% from the September 2008 quarter, worse than the 5.2% annual fall in the June 2009 quarter. Here is the release from Stats NZ:

Total manufacturing activity (measured by seasonally adjusted sales volumes) fell 1.4 percent in the September 2009 quarter, Statistics New Zealand said today. However, excluding meat and dairy product manufacturing, volumes rose 1.0 percent. "This rise, the first in seven quarters, follows a 15-year low last quarter," said business statistics manager Louise Holmes-Oliver. At the total sales level, meat and dairy product manufacturing was the dominant industry, with a 7.1 percent drop in volumes in the September 2009 quarter driving the overall decline. Excluding this industry, results were mixed, with six industries showing falls, six showing rises, and two showing little or no change. The industries with the largest volume movements in the latest quarter were:

• meat and dairy, down 7.1 percent
• wood products, up 9.1 percent
• basic metals, up 21.5 percent
• machinery and equipment, down 4.4 percent.

The value of sales (also adjusted for seasonal effects) fell by 5.1 percent ($1,004 million) in the September 2009 quarter. This is the fourth consecutive quarterly fall and has lowered sales to a level last seen in early 2007. Meat and dairy product manufacturing was again the dominant cause of the fall, mainly due to lower prices for dairy products. Excluding this industry, sales values were still down, but by a lesser 0.8 percent. The trend for the sales volume is down for the seventh consecutive quarter, while the trend for the sales value is down for the latest three quarters.

Here is ASB economist Jane Turner's take on the two sets of figures released today:

The weakness in manufacturing volumes and construction activity indicates substantial downside to our previous forecast for production GDP. We had been expecting a very slight increase, but we are now expecting a fractional decline in GDP instead. The overall condition of the economy in Q3 was that of one continuing to track sideways, as the recovery struggles to gain traction. Over the third quarter, momentum in house sales and lifts in volumes of non-meat and non-dairy commodity exports are likely to offset continued weakness in construction, manufacturing along with weak demand in retail and services sectors.