Manufacturing sector stirs

A pick-up in manufacturing activity in Canterbury last month has pushed Business New Zealand's performance of manufacturing index (PMI) into positive territory for the first time in six months.

The PMI rose 3.2 points from January to 51.2; readings above 50 indicate activity in the sector is expanding.

But the increase in activity was concentrated in Canterbury; the rest of the country declined further.

And the latest result was still below average for a February.

Business NZ said respondents' comments still pointed to fragility in the manufacturing sector.

It said the dollar's recent fall should enable manufacturers to be more competitive on the international market, but the flow-through into overseas orders might be some way off yet.

The PMI reflects firms' responses to "up or down?" questions about orders, production, deliveries of raw materials, stocks and employment.

New orders was the best performing sub-index, at its highest since May last year. Production is also in the black, for the first time in six months.

Meanwhile, Statistics New Zealand's quarterly survey of manufacturing recorded a 0.4 per cent increase in manufacturing sales in the December quarter, in real terms.

But the increase was concentrated in meat works and dairy factories.

Excluding meat and dairy processing, real sales were down 0.2 per cent, with the weakness most pronounced in machinery, equipment, forestry and basic metals manufacturing.

ANZ National Bank economists said in a note that there was evidence of a mild rundown of stocks that implied production was weaker.

"It will take at least a year for the manufacturing sector to respond to a lower dollar," they said.