Manufacturing activity expands for 4th consecutive month in Jan but environment 'still challenging'

Activity in New Zealand's manufacturing industry expanded for the fourth consecutive month in January, although the environment for manufacturing was still challenging, Business New Zealand said today.

The seasonally adjusted BNZ-Business NZ Performance of Manufacturing Index stood at 53.7 in January. An index score above 50 indicates expansion of activity in the sector, while a score below 50 indicates contraction.

“While new orders are looking reasonably robust, it is still a challenging manufacturing environment, with more negative comments to positive comments this month," BusinessNZ executive director for manufacturing Catherine Beard said.

"We are predicting a slow and steady improvement in activity in the sector, once the receipts from our improving export performance start to trickle through the economy and increase domestic demand," Beard said.

“Globally, the JPMorgan Manufacturing PMI, which New Zealand is part of, also started the year on a good note for 2011 with the January value at a nine month high.  Again, while New Zealand’s position has improved, Australia is still struggling somewhat with softening domestic demand and a high dollar," she said.

Big role to play

The expansion in activity comes after Finance Minister Bill English said last week that in order to put a big dent in New Zealand's unemployment rate, job creation was needed from the country's tradable sector. The government is hoping higher returns for NZ export commodity prices will flow through to job creation in the sector.

See the release below from Business NZ:

Manufacturing activity in January 2011 shows a positive start to the year with the fourth consecutive month in expansion, according to the BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January stood at 53.7, up slightly from 53.2 in December (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).  All five indices - production (52.8), employment (52.8), new orders (56.6), finished stocks (50.7) and deliveries(52.4) were all in expansion for the third consecutive month.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the continued expansion of new orders over the last 5 months is an encouraging indicator that the expansion will continue, even if it is slow and steady.

“While new orders are looking reasonably robust, it is still a challenging manufacturing environment, with more negative comments to positive comments this month.  We are predicting a slow and steady improvement in activity in the sector, once the receipts from our improving export performance start to trickle through the economy and increase domestic demand”.

“Globally, the JPMorgan Manufacturing PMI, which New Zealand is part of, also started the year on a good note for 2011 with the January value at a nine month high.  Again, while New Zealand’s position has improved, Australia is still struggling somewhat with softening domestic demand and a high dollar.”

BNZ economist Doug Steel said the economy’s recent experience was neatly summed up by one respondent to the PMI survey this month as ‘an economic rollercoaster’.

“Our view is that the outlook for 2011 is brighter, but no doubt the rollercoaster ride will continue within the context of a likely improving trend. Today’s further improvement (albeit minor) in the PMI is a small step in the right direction.” 

Unadjusted results by region showed three of the four regions in contraction during January, going backwards by 2 to 4 points.  The Northern region was down 2.7 points (49.2), while the Central region was down 4.1 points (49.0).  In the South Island, the Otago/Southland region was down 4.3 points (57.0), while Canterbury/Westland (43.1) fell back 5.3 points from December.