Factory production falling

A plunge in manufacturing activity has added to the deepening economic gloom.

The ANZ-Business NZ Performance of Manufacturing index dipped to 47.6 in December, down 4.7 points on the previous month.

That was the lowest overall result since the survey began in 2002 and compared with a value of 58.1 in the same month a year earlier.

A PMI reading above 50 indicates manufacturing is expanding, while below 50 indicates a contraction.

Manufacturers said activity was much quieter than usual in the build-up to Christmas, with the high dollar remaining the key issue across most sectors.

The fall in manufacturing was widespread, with the central region recording its lowest result of 45.1, compared with 57.7 in November.

New orders clocked in at 48.1, the second-lowest result on record, while the employment index, at 46.2, posted its lowest result.

One bright spot was the delivery of raw materials, where the food and beverage sector showed a healthy expansion of 62.5 in December.

Finished stock, at 50.8, showed only a slight expansion, and production stood at 46.2, the joint lowest sub-index for the month.

The survey is consistent with recent economic forecasts showing the economy is expected to expand at a much slower clip in the next couple of years.

BNZ economists on Wednesday revised their growth forecasts for this year and next. They said that while they still expected a soft landing for the economy, a recession was "a real possibility within 12 months".

BNZ is forecasting 1.7 per cent growth this year, from previous forecasts of 2.4 per cent growth and 1.5 per cent next year from 3.1 per cent.

The latest business confidence survey released by the economic think-tank the Institute of Economic Research showed business confidence slumped in the December quarter to its lowest level since before the 1987 sharemarket crash.

- NZPA