Manufacturing growth eases at year-end

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Expansion levels in the manufacturing sector eased during December, according to the Business NZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for December stood at 53.8, which was 2.9 points lower than the November result. Despite the fall, it still indicated the sector was expanding, sitting at the lower end of results for 2007. The average PMI value since the survey began in 2002 is 54.6.

A PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining. PMI values for December in the years 2002-2006 ranged from 48.8 to 59.3. The 2007 result was the second lowest December value, with the 48.8 recorded in 2005 the only time in which a decline occurred.

Business NZ chief executive Phil O’Reilly said that the result for December was somewhat disappointing given the latter half of 2007 had generally shown healthier growth, although the result showed manufacturing continued to stay on the right side of the ledger.

“Despite the various issues manufacturers have had to deal with during 2007 including the persistently high New Zealand dollar, ongoing staff shortages and increased competition from offshore markets, manufacturing activity has been at its best level in three years,” he said.

The overall average PMI result for 2007 stood at 55.1, compared with 53.3 for 2006 and 50.9 for 2005.

Mr O’Reilly said clouds on the horizon involving a weaker global economy may cause issues for manufacturers in 2008, especially those with a strong export focus.

“At an international level, it’s pleasing to see New Zealand sitting comparatively well in its level of activity in relation to other countries. Although the New Zealand result was behind Australia’s, the JPMorgan Global PMI fell to its lowest level for almost four-and-a-half years, primarily due to a worsening of manufacturing conditions in the US,” he said.

Unadjusted activity for December showed contrasting results amongst some of the regions. Both South Island regions again recorded strong results, led by the Otago/Southland region (60.9), followed by the Canterbury/Westland region (57.5). For the North Island, the northern region (52.0) showed only moderate expansion (and the third highest result for a December month), while the central region (44.9) displayed a sizeable level of contraction in activity – the third time this had occurred for a December month.

All five seasonally adjusted main diffusion indices recorded expansion for the fifth consecutive month, although most results showed a lower level of expansion. New orders (55.4) continued to nudge slightly ahead of production (55.0) in terms of activity levels, while finished stocks (53.5) and deliveries (53.4) were almost identical in activity, with the latter at its lowest level since June.


Results for the various manufacturing industries were generally positive throughout December. The food, beverage & tobacco sector (61.7) led the December results with strong activity to end the year, while the petroleum, coal, chemical & associated product sector (54.9) followed with more moderate expansion.