Manufacturing recovery stalls as NZ dollar rises

Manufacturing activity for May failed to build on an improvements in April, but equally there were no signs here or offshore of any significant worsening.

The sector generally remains in a tight band of performance since the start of the year, according to the BNZ Capital - Business NZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for May stood at 42.7. This was down 1 point from April, and 6 points lower than May 2008.

A figure below 50 indicates the sector is declining.

Apart from February, the sector has seen little change in activity, with values ranging by 1.7 points since December 2008.

Business NZ chief executive Phil O'Reilly said that while overall activity for May failed to build on the relative improvements in April, there were signs both here and offshore that any significant worsening of activity may now be less likely.

The fluctuation of the New Zealand dollar was making life difficult for exporters.

The NZ dollar has risen from around US49c in March to US63c today.

BNZ Capital senior economist Craig Ebert said that just when the global activity indicators, particularly around manufacturing, looked to be stabilising, the rising currency was causing concern.

In the North Island, the northern region, at 43.2, recorded its highest value since October 2008.

The central region, on 36.1, produced its worst result since the survey began, mainly due to significant falls in production and new orders. The Canterbury/Westland region, on 48.4, continued to show significant improvement over the last few months, while the Otago/Southland region, on 36.4, continued to flip-flop between a sub and post 40 result.

- NZPA