No Xmas cheer for manufacturing

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Manufacturing activity fell further into contraction during November, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for November was 45.7 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down from 46.6 in October, along with an average result of 51.4 for the first eleven months of 2011.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the lead-up to Xmas hasn’t been strong enough to get manufacturing back in the black.

“Manufacturing usually experiences a strong pick-up in the unadjusted November result to ensure an equally strong seasonally adjusted figure. However, the required leap from October to November just did not happen.

“Words such as recession, slowdown and the world economy dominated comments from respondents for those experiencing a drop in activity. The only comfort that can be taken from the current result is that we are not alone given the JPMorgan Global Manufacturing PMI also showed deterioration at 49.6 for November.”

BNZ Senior Economist Craig Ebert said, “The November PMI is worrisome reflecting a combination of softening global demand for metals and an extremely weak domestic construction sector. However, this is miles away from the GFC meltdown of 2008/09 and we remain hopeful that a pick-up in building activity and solid primary goods exports will support the sector through calendar 2012.”

Four of the five seasonally adjusted main diffusion indices were in decline during November, with production (43.6) recording the lowest result. This was followed by new orders (45.8) and deliveries (47.5). Employment (49.6) improved one point but still in technical contraction, while finished stocks (51.2) was the only index in expansion.

Unadjusted results by region showed three of the four regions in expansion, with the Otago/Southland region (71.0) again leading the way. However, while the Northern (54.9) and Canterbury/Westland (56.9) regions returned to expansion from October, the Central region (43.2) fell back to its lowest level since April 2011.