Manufacturing sector growth firms in April

Manufacturing sector growth firmed in April, although the growth in activity was restricted to the north of the country, with other areas in decline.

The BNZ -- BusinessNZ performance of manufacturing index (PMI) was a seasonally adjusted 51.5 in April, up from 50.2 in March but lower than the four months between November and February when readings around 53 were recorded. A reading above 50 indicates manufacturing is generally expanding.

Four of the five sub-indices that make up the PMI expanded last month, compared to two in March.

BNZ economist Doug Steel said that while the rate of progress was not fast and was off a relatively low base, it was quite a remarkable performance given events of recent months.

The February earthquake in Christchurch continued to dominate comments from respondents, with negative comments outnumbering positive comments by five to two, among those firms that operated in Christchurch and noted the earthquake as the major influence on business activity in the past three months.

Among firms operating outside Canterbury, positive comments outnumbered negative comments by three to two, Mr Steel said.

"This fits with our thinking that while major disruption and dislocation continues in parts of Christchurch, the initial net impact on the wider economy has been more muted.

"Moreover, the ongoing clean-up, repair and rebuilding of Christchurch is more likely to lift manufacturing activity levels than depress them from their current position."

At the same time, manufacturers around the country were downbeat on the current state of construction activity, although the future for the building industry was looking brighter.

"Looking at the brightening outlook for the construction sector, we suspect it will not be too long before the construction-related manufacturing sectors jump on the coat tails," Mr Steel said.

Among the sub-indices of the PMI, finished stocks had a seasonally adjusted reading of 54.8 last month, new orders were 52.9, deliveries 51.6, production 50.8, and employment 49.9.

The regional breakdown showed the northern region, including Northland, Auckland, Waikato and Bay of Plenty, with an unadjusted reading of 56.7, a six-month high. The central region, covering the rest of the North Island was at 40.9, its lowest level since May 2009 mainly due to low new orders and production levels.

The area covering Canterbury, Marlborough and West Coast was at 47.8, while Otago and Southland recorded 47.2. Both the South Island areas were doing better than in March although still in decline.