Barometer positive for output

The manufacturing index fell slightly but remains positive. Photo / Alan Gibson

A barometer of manufacturing activity is still pointing to fair weather.

The BNZ/Business New Zealand performance of manufacturing index (PMI) fell 1.6 points to 54.5 in March.

But it remains solidly in expansion territory, said BNZ economist Craig Ebert. Any reading above 50 indicates expansion.

Business NZ's executive director for manufacturing Catherine Beard said although the level of expansion was not as strong as the previous month, activity was still healthy and positive across most of the sub-indices.

The new orders gauge fell three points from February's levels but at 57.4 per cent it remains in the top half of its range over the past year. Production was up and finished stocks down.

But employment slipped into negative territory - at 49.5 it is at its weakest since September 2013.

"Comments from respondents remained more positive [60 per cent] than negative [40 per cent], although a number of those who provided a negative influence mentioned the increased value of the New Zealand dollar, in particular against the Australian," Beard said.

Ebert said the PMI's picture of a manufacturing sector in relatively good heart reinforced the conclusions from NZIER's quarterly survey of business opinion on Tuesday in which manufacturers' investment and hiring intentions were strong.

Regionally, the PMI was strongest in the upper North Island at 59.8 and weakest in the central and southern North Island at 50.5.

Both China and Australia, our two largest trading partners, have PMIs in negative territory.