NZ manufacturing activity shrugs off election uncertainty in September

New Zealand manufacturing activity continued to expand in September. Photo / Bloomberg

New Zealand manufacturing activity continued to expand in September, largely shrugging off uncertainty surrounding the general election on September 23 with a small slowdown.

The BusinessNZ-Bank of New Zealand performance of manufacturing index fell 0.4 points to a seasonally adjusted 57.5 in September, extending its run of expansionary readings above 50 in every month since October 2012.

"September's performance of manufacturing index proved to be about as strong as it was in August," said Bank of New Zealand senior economist Craig Ebert. "Aside from remaining comfortably above its long-term average (of 53.4), this was a particularly encouraging result considering the proximity of the 23 September general election."

About a quarter of respondents cited the election as a major negative factor on their business, "so it wasn't a non-issue, as such," said Ebert.

BusinessNZ manufacturing executive director Catherine Beard said despite some uncertainty in the market, the sector has continued on with business as usual.

"It was encouraging to see the proportion of positive comments increase further to 69.5 per cent, compared with 65 per cent in August. In terms of specific comments, a clear proportion of negative comments continued to mention general uncertainty around the election," she said.

Polls leading up to the election did not point to a clear winner, which generated uncertainty in the market. In the end, National won 56 seats of the 120-seat Parliament while the Labour and Green parties won 54 seats between them. National and the Labour-Green bloc wrapped up negotiations with New Zealand First this week, and the centrist party will now decide which way to go.

Among the sub-indices, employment fell to 50.7 from 56.5 in the prior month. Ebert said "it's tempting to see this as manufacturers pushing pause on their hiring, as they await news on the form of the next New Zealand government," but noted that the jobs index has been volatile for the past six months or so but with a "reasonably positive average."

The production sub-index eased 0.8 points to 59.6 while new orders rose 1.4 points to 60.4. Finished stocks added 2.5 points to 55.4 while deliveries rose 2.2 points to 58.3.

In unadjusted terms, activity slowed in the Northern region, falling to 56.4 from 56.9, while the Central region rose to 65.3 from 57.0. Activity in Canterbury fell to 54.7 from 57.7 while it rose to 61.7 from 61.3 in Otago.