Manufacturing growth continues to bounce back

A survey of manufacturing activity rose for a third consecutive month in December, providing evidence of an expected rebound in the sector.

The seasonally adjusted BNZ -- BusinessNZ performance of manufacturing index for December stood at 53.1, up slightly from 52.7 in November and 50.4 in October.

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

The December survey was the first time since the start of 2008 that all five sub-indices -- production (52.6), employment (51.1), new orders (54.3) finished stocks (51.6) and deliveries (54.9) -- showed expansion for a second consecutive month.

BusinessNZ manufacturing executive director Catherine Beard said that during 2010, manufacturing had been in contraction for three months, well below the 2009 figure of eight and 2008 figure of nine.

"Also, given the last quarter of 2010 was positive throughout, it suggests manufacturing will enter 2011 on a firmer footing than was looking likely at the end of the September quarter," she said today.

BNZ senior economist Craig Ebert said the latest figures showed evidence of a predicted rebound in manufacturing.

"Importantly, given recent wobbles, manufacturers are now reporting a lift in production."

The PMI provided good reason to think manufacturing had strengthened during the closing stages of 2010 and into 2011.

That was backed up by equally positive tones in the manufacturing section of the New Zealand Institute of Economic Research's recent quarterly survey of business opinion, Mr Ebert said.

"In large respect, the surveys are singing from the same song sheet. This gives us added confidence that manufacturing activity is probably picking up now, having hit a weak patch over the six months to September last year."

Unadjusted PMI results by region showed three of the four regions in expansion during December, although all showing lower values than November. The Northern region was down 9.6 points (51.9), while the Central region was down 7.5 points (53.1). In the South Island, the Otago/Southland region was down 4.7 points (61.3), while Canterbury/Westland (48.4) fell back to levels similar to October.