Manufacturing sector on the rise in South: survey

Southern provinces rebounded from consecutive scores below 50 in December and January. Photo / 123RF

Otago and Southland manufacturing has returned to expansion mode with "steady" construction sales and a buoyant hospitality sector.

The theme of ongoing southern skills shortages remains, as does the uncertainty and potential for disruption to exporters amid the complex Brexit issue.

According to the BNZ-BusinessNZ manufacturing survey, the southern provinces rebounded from consecutive scores below 50 in December and January to 53.3 in February.

Scores above 50 reflect expansion; below 50, contraction.

Otago Southland Employers Association chief executive Virginia Nicholls said the 53.3 points was closer to the average from the past year.

"The proportion of positive comments have improved from last month and are sitting at 47 per cent," Nicholls said.

Nationally, the index eased 0.7 points to 53.7, and the four regions across the country ranged from 49.7 to 55.7 points.

In the regional breakdown by categories, Mrs Nicholls said employment levels, new orders, production levels, stocks of finished products and deliveries of raw materials were all just above 50 points: all in expansion.

"Businesses supplying the hospitality sector have had good sales, helped by the warm weather," she said.

Businesses supplying the construction industry were reporting "steady sales", but some manufacturers were experiencing timing issues with projects, which they hoped would be resolved in the short term, Nicholls said.

Aside from an ongoing skills shortage in the South stretching into two years, she also highlighted visa problems. "Manufacturers are experiencing immigration visa processing delays both for existing staff, who are trying to extend their visas, which means some have had to stand down until this is resolved, but also visas for new migrant workers coming into New Zealand," she said.

"There's ongoing concerns around disruption with Brexit for exporters to the United Kingdom and European Union."

BusinessNZ's executive director for manufacturing Catherine Beard said overall February was a stable month for the sector.

"Seasonal factors were still evident throughout the comments, although a number of respondents felt that February was business as usual," she said.

The national proportion of positive comments rose from 47.7 per cent in January to 51.1 per cent.

While sub-index values of production and new orders showed a part recovery and rose, respectively to 53.9 and 54.7, employment dropped 1.8 points to 50.8, its lowest level since August 2018.

BNZ senior economist Craig Ebert said while the index remained "broadly encouraging", inventory of total stock needed watching, in case that forewarned of a slower tone to manufacturing production.