NZ manufacturing picks up after brief mid-year lull

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New Zealand manufacturing activity picked up in August, extending the period of expansion to two years, and pointing to more industrial production after a mid-year lull.

The BNZ-Business NZ performance of manufacturing index rose to 56.5 in August from 53 in July, and just below the 56.8 reading in the same month a year earlier. The index was at the highest point since March, and has been above 50, which indicates the sector is expanding, for 24 months.

"Today's performance of manufacturing index, overall and in its detail, offers support to the idea that the manufacturing sector will bounce back from the Q2 softness before long," BNZ economist Doug Steel said in his report. "The combination of a solid lift in new orders and a drop in new orders and a drop in inventories is also a pointer to more production ahead."

The gauge comes after government figures last week showed the volume of manufacturing fell 0.7 percent in the June quarter with declining meat and milk production at the tail-end of the agricultural production season weighing on activity.

BNZ's Steel said lower dairy revenues and slower retail sales will probably weigh on manufacturing activity in the future, though increased construction work should help support industrial production.

Today's PMI shows the production sub-index was at a 13-month high 60.1, while new orders rose 2.8 points to 58.3. Employment rose 1.7 points to 53.2, its highest level since May, while deliveries advanced 2 points to 55.7. Finished stocks was the only measure showing a contraction at 48.5.

Across the regions, Northern was at 60.6, Canterbury/Westland was at 54.7 and Otago/Southland at 57.9. The Central region showed shrinking activity at 46.3.

Food, beverage and tobacco manufacturing showed the fastest expansion in the month at 66.9, followed by petroleum, coal, chemical and associated product manufacturing at 63.5. Machinery and equipment manufacturing was at 52.3, while metal product manufacturing activity showed a small contraction in the month, with a reading of 49.2.