Manufacturing sector improving, survey

Photo / Thinkstock

Manufacturing activity rose for the four consecutive month during January, albeit at a 'slow and steady' pace.

The latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI) index shows the seasonally adjusted PMI for January stood at 53.7, up slightly from 53.2 recorded in December.

A PMI reading above 50 indicates that manufacturing is generally expanding, below 50 that it is declining.

All five indices - production (52.8), employment (52.8), new orders (56.6), finished stocks (50.7) and deliveries (52.4) were in expansion during the month.

BusinessNZ's executive director for manufacturing Catherine Beard said that the continued expansion of new orders over the last 5 months was an encouraging indicator that the expansion will continue - even if it was slow process.

"While new orders are looking reasonably robust, it is still a challenging manufacturing environment, with more negative comments to positive comments this month.

"We are predicting a slow and steady improvement in activity in the sector, once the receipts from our improving export performance start to trickle through the economy and increase domestic demand."

Globally, the JPMorgan Manufacturing PMI, which New Zealand is part of, also started the year on a good note with the January value at a nine month high.

While New Zealand's position had improved, Australia was still struggling with softening domestic demand and a high dollar, Beard said.

BNZ economist Doug Steel said the economy's recent experience was summed up by one respondent to the PMI survey this month as 'an economic rollercoaster'.

"Our view is that the outlook for 2011 is brighter, but no doubt the rollercoaster ride will continue within the context of a likely improving trend. Today's further improvement (albeit minor) in the PMI is a small step in the right direction."

Unadjusted results by region showed three of the four regions in contraction during January, falling by 2 to 4 points.

The Northern region was down 2.7 points (49.2), while the Central region was down 4.1 points (49.0).

In the South Island, Otago/Southland was down 4.3 points (57.0), while Canterbury/Westland (43.1) fell back 5.3 points from December.

- NZ HERALD ONLINE