Manufacturing expands as firms look to Australia

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New Zealand manufacturing continues to underpin the nation's economic recovery, as Australian buyers help stoke demand.

The BNZ-Business New Zealand performance of manufacturing index slipped 1.1 point to 53.2 last month, remaining above the 50 level that separates contraction from expansion.

The new orders component registered the biggest expansion at 56, followed by deliveries at 53.7 and employment at 52.2. Production fell 0.6 points to 51.8, while finished stocks returned to expansion at 50.7.

"This is important momentum to confirm, especially in the event that the latest world financial market wobbles dent confidence as it well might," BNZ economist Doug Steel said in his report. "The NZ economy has a decent amount of momentum to carry it through at least some short term nervousness in world financial markets."

Manufacturing has regularly been one of the strongest-performing industries in recent economic surveys, as New Zealand's economy bounces back faster than analysts expect. The sector made up 12.5% of the gross domestic product in the three months ended March 31, and was the fastest growing sector at a quarterly pace of 3.6 per cent.

Catherine Beard, Business NZ executive director for manufacturing, said local manufacturers have been enjoying the weak cross-rate with the Australian dollar, with the kiwi dollar recently trading at 79.84 Australian cents, and there was a ready market across the Tasman.

Canterbury/Westland reported the greatest regional expansion at 56.3, followed by Northern region's 53.3 and central's 50.8. Otago/Southland remained in contraction at 48.5.

Machinery & equipment manufacturers were the fastest expanding sub-group at 557.9, followed by food, beverage & tobacco at 54.1, while petroleum, coal, chemical and associated products stayed in contraction at 45.4.

Manufacturers lifted the average wage rate 0.9 per cent to $24.75 an hour in the three months ended June 30, according to the Quarterly Employment Survey, for an annual increase of 3.6 per cent.

At the same time, manufacturers cut the number of people employed to 244,700 in the June quarter from 252,000 in the March period, according to the Household Labour Force Survey.