Manufacturing signs positive

Photo / Thinkstock

A gauge of activity in the manufacturing sector is pointing to expansion.

The BNZ-Business New Zealand performance of manufacturing index for last month stood at 54.7, up 2.7 points from April and the highest since June last year. Any level above 50 indicates expansion.

Business New Zealand's executive director for manufacturing, Catherine Beard, said that although there had been some layoffs in the sector recently, overall it had shown signs of resilience even in the face of a high exchange rate with the US dollar.

"It is particularly pleasing to see such a positive result from Canterbury manufacturers, who have have come back quite quickly into expansion mode after the February earthquake," she said.

Bank of New Zealand economist Doug Steel said the currency's strength was a concern for many manufacturers. "Negative comments [on the dollar] outweighed positive comments by four to one."

Positive currency comments mainly related to the transtasman exchange rate.

"There is still plenty of concern around other factors, such as the ongoing negative effects from the Christchurch earthquakes - this survey pre-dates the strong after-shocks on Monday - the weakness in the construction sector, poor cashflows, and overdue debtors," Steel said.

But he pointed to the difference between the survey's indices for new orders and inventory, which is the widest it has been for more than a year.

"The idea being that if new orders are outpacing inventory this will elicit a production response to satisfy rising demand."