Christchurch earthquake tramples manufacturing recovery

Manchester Street in central Christchurch after February's earthquake. Photo / Simon Baker

New Zealand manufacturing fell in March with the effects of the Christchurch earthquake eroding a recovery in production seen at the start of the year.

The BNZ-Business NZ Performance of Manufacturing Index fell to a seasonally adjusted 50.1 in March from 52.6 in February, and 53.2 in January.

A PMI reading of 50 points indicates manufacturing activity is expanding, while a reading below 50 indicates it's contracting.

The March data, which closes out the first quarter of the year, indicates that activity levels have stalled in the wake of the 6.3 magnitude earthquake which struck the Christchurch on February 22.

Within the index, employment was the only category to improve in March, at 53.2 compared to 50.7 in the same month last year.

Production fell to 50.4 from 60.6, new orders declined to 49.3 from 57.9, finished stocks fell to 48 from 53.1, and deliveries dropped to 47.8 from 57.3 previously.

In January, all five categories were in expansion.

"New orders have fallen flat, much like production, which is not very encouraging in the near term," said Craig Ebert, senior economist at Bank of New Zealand.

"However, employment held up rather well, which seems to point to firms envisaging a reasonable pickup in the medium term."

Breaking the data down by industry, Ebert noted that manufacturers producing goods for export markets continued to see high activity levels, led predominantly by dairy, while those catering for domestic markets were in contraction.

The trend is reflected by low consumer sentiment as households focus on repaying debt rather than splashing out at the shops.

Geographically, the data paints a tale of two islands - the North Island was still in expansion in March, while the South Island was in contraction.

Activity in the Northern region fell to 52.4 from 57.8 in the same month last year, while the Central region rose to 53.1 from 49. On the South Island Canterbury/Westland fell to 42 from 58.6, while Otago/Southland declined to 44.3 from 57.5.