The manufacturing sector shrank for the second month in a row in August but Business New Zealand does not expect the Canterbury earthquake to have an overly negative impact on manufacturing in that region.The seasonally adjusted BNZ - BusinessNZ Performan
The manufacturing sector shrank for the second month in a row in August but Business New Zealand does not expect the Canterbury earthquake to have an overly negative impact on manufacturing in that region.
The seasonally adjusted BNZ - BusinessNZ Performance of Manufacturing Index for August stood at 49.3, down one point from July. A PMI below 50 indicates that manufacturing is declining.
BNZ economist Doug Steel said the manufacturing sector was currently jogging on the spot, rather than pushing forward.
BusinessNZ's executive director for manufacturing, Catherine Beard, said that the results from Canterbury manufacturers were collected for the period prior to the magnitude 7.1 earthquake on September 4, but the earthquake will not have an overly negative impact as larger manufacturers escaped relatively unscathed. Many had new buildings and were only briefly interrupted.
"While some Canterbury manufacturers will be concerned about a possible downturn in local trading and getting access to buildings, new spending to rebuild the region is expected to have a positive economic benefit in the medium term," she said.
Unadjusted regional activity was a mixed bag in August, with a lift in activity in the Northern and Canterbury-Westland regions, and contraction in Central and Otago-Southland regions.
Mr Steel said the rather brisk slide from a solid 55.1 PMI average in the first half of the year was concerning as was a drying up of new orders through July and August.
"Which way next from this stalling remains to be seen. Our pick is that this is a bump in a slow and bumpy recovery and we anticipate some improvement as we move into 2011, if not before."
The report comes out on a day the Reserve Bank of New Zealand paused in a tightening interest rate cycle.
Explaining his decision to leave the official cash rate unchanged today, Reserve Bank Governor Alan Bollard said that while global and domestic economies continued to recover, the outlook had weakened since June.
The Canterbury earthquake had significantly disrupted economic activity and was likely to continue to do so for some time yet, Dr Bollard said.
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