June jump keeps manufacturing activity on track – PMI
The month of June saw a pick-up in the level of expansion for the manufacturing sector, according to the BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for June stood at 56.2, which was up 1.8 points from May (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This represented the tenth consecutive month of expansion, and the second highest June result since the survey began in 2002. When looking at the latest quarter of results, activity has been strong, averaging 56.4.
BusinessNZ’s executive director for manufacturing Catherine Beard said that the results show a continuing solid performance from the New Zealand manufacturing sector.
“The continued expansion in the manufacturing sector for the tenth consecutive month shows a slow and steady path to recovery, and the sentiment from manufacturers could best be described as cautious optimism. While all the indices are continuing to head in the right direction it has been a slow and steady climb back from the depths of the recession and for many the improvement has been a bit up and down.
“Regarding the positive result for employment, we expect manufacturers will take on permanent staff where they are critical to plant operations and where there is sufficient growth, but be keen to supplement that with contractors so they have some flexibility. While we continue to head in the right direction, the recovery of the sector has been a bit slower than some would have expected coming out of a recession. This probably reflects the worldwide nature of the global financial crisis injecting significant caution across a range of sectors.”
Bank of New Zealand economist Doug Steel said the solid pace of the manufacturing sector pushing forward is important as the rebound in manufacturing production, foretold by the PMI, has been a major thrust behind the economic recovery to date.
“Manufacturing GDP is up 4.3 percent on year ago levels, displaying more than twice the pace of growth in the economy overall. While we need to remember that this growth has been off a very depressed base due to the recession, there is a sense of growth reorientation going on in the economy, with manufacturing, mining and forestry standing out.
“This reorientation of growth is closely associated with the economic rebalancing towards production and saving, and manufacturers’ growing confidence suggests the sector has become a relative sweet spot, with more growth around the corner.”
All five of the seasonally adjusted main diffusion indices were in expansion. The strongest improvement was in employment (52.4), which went from contraction in May to record its highest result since November 2007. Production (56.2) picked up 1.2 points after a drop in May, while new orders (58.0) did likewise. Finished stocks (54.7) increased to its highest value since October 2007, while deliveries (56.6) experienced its second consecutive dip in expansion.
For media comment:
Catherine Beard ph 04 496 6560 or 027 463 3212
Stephanie Moakes, ph 04 496 6554 or 021 959 831
Doug Steel, ph 04 474 6923