Manufacturing takes slide

By BRIAN FALLOW

The manufacturing sector lost much of its strength last month.

The ANZ-Business New Zealand performance of manufacturing index (PMI) fell 68.6 points to 56.4, retracing all of its cumulative rise over the previous three months and then some.

But it remains on the right side of 50, indicating an expanding manufacturing sector.

More firms are reporting higher levels of production, employment, deliveries and new orders than are reporting falls.

"Micro" firms, with up to 10 workers, fared worst, with most of these manufacturers reporting drops in production, employment, new orders and deliveries.

ANZ chief economist David Drage said that because the local PMI, which is modelled on well-established indicators used overseas, had been running for just five months, economists could only speculate about how much of last month's decline was a seasonal phenomenon.

But respondents could attach comments and some mentioned the impact of the rising New Zealand dollar on exports, especially to Australian and Asian markets.

"It is raising fears about the future but whether it has had a material impact yet is debatable," Drage said.

The PMI for Australia, the largest export market for manufacturers, also declined last month, but it also remains in positive territory.

"Some of the strength in the [Australian] residential construction market is starting to wane, though there is still a fair amount in the pipeline."

The regional breakdown was surprising, Drage said, with North Island manufacturers reporting the steepest declines, despite the buoyant Auckland economy.

Otago/Southland continued to strengthen.

He believed seasonal factors might be at work.