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New Zealand manufacturing activity expanded for a 15th straight month in December, with more production likely in the coming year on strong new orders and dwindling inventories.
The BNZ-BusinessNZ seasonally adjusted performance of manufacturing index slipped to 56.4 from 56.7 in November, but was up from 50.7 in December 2012. A reading above 50 indicates expansion in the sector. New orders led activity at 61.4 in December from 62 a month earlier, while production was at 57.2 from 59.4 in November. Finished stocks contracted for the first time since April, with a reading of 48.6. Employment rose to 55.2 from 53.3 and deliveries of raw materials fell to 52 from 56.7 in November.
"The combination of strong new orders and falling inventory in the PMI is a positive indicator for more production ahead," BNZ economist Doug Steel said in a report accompanying the release. "Manufacturing growth might well surprise on the high side given that the difference between the PMI new orders and inventory indicators is at its widest since 2004."
Government figures last month showed the country's manufacturing sector grew 1.5 percent in the September quarter, underpinned by strong dairy food production. Accelerating construction activity is expected to spill over into more manufacturing.
The December PMI showed activity among food, beverage & tobacco manufacturers at 58.7, machinery & equipment manufacturing at 56.3 and petroleum, coal, chemical and associated products activity at 54.4. Metal product manufacturing activity shrank, with a reading of 49.
The Northern region led activity with a reading of 60.1, followed by Otago-Southland at 58.3. Activity in the Central and Canterbury/Westland regions contracted, with readings of 48.8 and 49.9 respectively.