Manufacturing continues positive and steady performance

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The level of expansion in manufacturing for September has continued this year’s positive trend, according to the Business NZ Performance of Manufacturing Index (PMI).

September’s seasonally adjusted PMI, at 54.6, was down 1.1 points from August, but very close to the July result.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for September in the years between 2002-2006 ranged from 51.2 to 58.6, with an average score of 54.9, closely resembling the latest result.

Business NZ chief executive Phil O’Reilly said that 2007 was shaping up to be a steady, rather than outstanding, year for manufacturing activity. However, the recent fluctuations in the New Zealand dollar were not ideal for creating certainty in business decisions in the months ahead.

“Previous comments by manufacturers have tended to centre on the level of the New Zealand dollar compared with our traditional trading partners. However, the wild swings in value over recent months mean that volatility is also a concern.” On a positive note, it was encouraging to see consistent use of the word “new” in terms of positive comments.

“New orders and new product lines were a reoccurring theme by those noting a healthy pick up in activity, which bodes well for those firms in terms of production activity leading into Christmas,” he said.

All five seasonally adjusted main diffusion indices again recorded expansion for the current month. New orders (57.4) exhibited the strongest level of expansion, followed by production (55.0).

Results for the various industries within the sector were generally positive throughout. The petroleum, coal, chemical & associated product sector (64.5) displayed the strongest result since November 2006, followed by another healthy result for the machinery & equipment sector (61.1). The metal product sector (45.5) experienced a sharp fall in activity during September after posting healthy expansion in August – the decrease in production and employment activity largely to blame for what was its lowest result since April last year.

Unadjusted activity for September showed expansion for all regions, with the strongest levels in the southern regions. The Otago/Southland region (66.9) experienced a very strong increase in expansion, followed by the Canterbury/Westland region (62.6). Both North Island regions were more subdued in their activity levels, with the Northern (51.8) and Central (51.7) regions showing almost identical levels of mild expansion.