Manufacturers get that flat feeling

Catherine Beard: Five months of contraction

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This year is likely to bring more mixed results for manufacturers.

The latest BNZ-Business New Zealand Performance of Manufacturing Index (PMI) recorded just 50.1 in December.

That is 1.3 points higher than November but lower than the index average of 50.9 for 2012.

A PMI reading above 50.0 indicates manufacturing is generally expanding; below 50.0 shows the industry is declining.

Business NZ executive director for manufacturing Catherine Beard says the December result was symptomatic of the flat feeling manufacturers experienced last year.

“Five of the 12 months were in contraction, with only two months (February and May) showing any sufficient levels of expansion.

“This year will most likely present similar challenges for many manufacturers, although the long-awaited expectation of increased growth due to a slowly improving global economy, along with further upwards momentum in the Christchurch rebuild, should assist in driving up demand for products.”

BNZ economist Doug Steel characterises the year as having plenty of “ebb and flow”.

“For every indicator that looked to be doing a bit better, there seemed to be another one slipping the other way," he says.

"At least production-wise, there looks to have been enough over the past three months for manufacturing to make a positive contribution to Q4 GDP growth.”

Production was the only industry to expand in December, following a decline in November.

The other key index of new orders (48.9) fell back into contraction. Finished stocks (48.8) also fell into contraction after three months of continued improving results, while deliveries (49.9) showed no change.

Employment (49.1) is suffering from a four-month contraction period.

The northern region of the North Island had the biggest drop, falling 8.2 points. By contrast, both South Island regions remained in expansion mode – Canterbury/Westland on 53.4 points and Otago-Southland doing better than the rest of the country on 60 points.

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