Manufacturing activity shrinks in March quarter

New Zealand manufacturing activity shrank in the first three months of the year as meat and dairy volumes declined in a period when global milk prices remained under pressure and parts of the country were stricken with drought.

The volume of total manufacturing fell a seasonally adjusted 0.3% in the three months ended March 31, turning around from two quarters of 0.6% growth, and up 0.4% from the same period last year, according to Statistics New Zealand. The quarterly decline was added to by a 1.5% drop in meat and dairy product manufacturing, the sector's biggest quarterly contraction since June 2013.

Other sectors reporting a dip in the quarter included fruit, oil, cereal and other food manufacturing, which shrank 0.8%. Wood and paper product activity fell 0.6%, printing dropped 6.5%, chemical, polymer and rubber products declined 1.9%, and metal products manufacturing slipped 4.3%.

"Meat and dairy has fallen in four of the last five quarters, following a large rise in the December 2013 quarter," business indicators manager Neil Kelly said in a statement. "Without the meat and dairy contribution, the combined sales volume in the remaining 12 industries was unchanged, despite a large 12% rise in petroleum and coal products."

New Zealand's manufacturing activity has been expanding for the past 30 months, and the BusinessNZ-Bank of New Zealand performance of manufacturing index due this week is expected to show the sector continue to grow, even as weak dairy prices and a slowing Australian economy sap some demand for industrial production.

Today's data shows the value of manufacturing sales fell a seasonally adjusted 2.8% in the quarter, its fourth successive decline, and was 6.8% lower than the same period a year earlier, at an unadjusted $23.76 billion.

Petroleum and coal product manufacturing was the stand-out in the series, with volumes up 12% in the quarter, even as values shrank 9.3%, while beverage and tobacco product volumes gained 1.7% for a 3% rise in the value of sales.

The value of raw materials ended the quarter at $3.62 billion, down 1.1% in the three-month period, and 3.3% below the same time a year earlier. Finished goods at $10.66 billion were 2.7% higher than the December quarter, though still 17% lower than a year earlier.

(BusinessDesk)