Manufacturing slows in July, building work still strong

New Zealand's manufacturing activity expanded at a slower pace in July although the country's booming construction sector continues to support industrial production.

The Bank of New Zealand-BusinessNZ performance of manufacturing index fell 1.8 points to a seasonally adjusted 55.8. A reading of 50 separates expansion from contraction and the long-term average is 53.1.

New Zealand's manufacturing sector has been expanding since October 2012, buoyed by a construction boom that started in the post-earthquakes Christchurch rebuild and has extended to Auckland's housing market.

"As we've frequently pointed out, the manufacturing sector is being greatly supported by a hefty construction cycle," Bank of New Zealand economist Craig Ebert said in a note. "There is increasing evidence that the rest of the country is joining in the building boom."

Among the PMI's sub-indices, production accounted for the most rapid expansion at a reading of 58.4, down from 60.6 in June, followed by new orders at 58.1, down from 61.3. Deliveries was at 55.1, falling from 56.1 a month earlier. Employment bucked the trend, rising to 54.6 from 53.7, while finished stocks fell to 49 from 50.6, making it the only sub-group to contract in the month.

Ebert said the employment reading "sets a good chance of seeing a rebound in the Household Labour Force Survey measure of manufacturing employment".

Across the regions, Northern registered a reading of 55.8, down from 57.8, followed by Central at 54.6, falling from 60.5. Canterbury posted a reading of 53.8 up from 52.5, while Otago increased to 53.7 from 53 in June.

(BusinessDesk)

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Paul McBeth
Fri, 12 Aug 2016

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Manufacturing slows in July, building work still strong