New Zealand manufacturing expansion weakened slightly in May but the outlook still remains positive, according to the latest ANZ-Business NZ Performance of Manufacturing Index (PMI).
New Zealand’s PMI value declined slightly from 54.8 in April to 54.1 in May (a PMI reading above 50 points indicates expansion and below 50 indicates decline). This remains 4.5 points higher than May 2003.
Three of the five sub-indexes recorded expansion in May (production, new orders and deliveries of raw materials), while the employment index was broadly stable and the finished stocks sub-index recorded a moderate decline. The decline in finished stocks is encouraging as it suggests manufactures sales were higher than production in May. It was the second consecutive month that finished stock levels have fallen and resulted in an increase in production levels in May compared with April. New orders (58.2) was again the highest of the sub-indexes, indicating a reasonable level of expansion is still expected.
All regions recorded expansion, with the Canterbury/Westland region again indicating the strongest level of expansion. Production increased again in Otago/Southland but the index was pulled down by further declines in employment and stock levels. New orders in the region were the strongest since November 2003.
Seasonal issues were noted in food, beverage & tobacco, with a slowing in meat processing the main factor reported. This also had impacts on the petroleum, coal, chemical & associated product sector, as a supplier of plastic packing to the meat processing sector.
Export activity remains mixed, with more firms reporting a pick-up in new orders from Australia, Japan and the U.S., while others were still finding export orders difficult due to the value of the New Zealand dollar. Competition from imports and higher raw materials prices in the chemicals sector continue to be reported as concerns. Improving export markets, especially Australia and Japan, contributed to stronger growth in new orders in the wood & paper product sector.
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