Manufacturing growth slow but steady

A key barometer of manufacturing activity continues to point to slow but steady expansion.

The BNZ-Business New Zealand performance of manufacturing index (PMI) has been in positive territory since September, after 18 months of contraction. It rose a further 1.2 points to 53.3 last month, on a seasonally adjusted basis. Any number above 50 indicates rising activity.

BNZ economist Stephen Toplis said the economic data by and large supported the optimistic tenor of the PMI.

Retail sales rose 1.3 per cent in the December quarter in volume terms, excluding the volatile automotive sector. While much of that increase was supported by heavy discounting rather than a genuine upswing in demand, the fall in stock-to-sales ratio was positive for future manufacturing demand in the domestic market, he said.

"The really positive news for manufacturers continues to come from the export sector."

Exporters into Australia benefit from a resurgent Australian economy and an exchange rate at 10-year lows.

More generally, growth among New Zealand's trading partners was forecast to average 3.8 per cent a year over the next three years, Toplis said, a far cry from the 0.4 per cent in contraction recorded over 2009.