New orders keep manufacturing on track – PMI
Continued high levels of new orders ensured the manufacturing sector remained in expansion, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for September was 54.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was the second consecutive month the level of expansion has declined, compared with previous September results the 2013 value was the highest since 2007. Overall, the PMI has averaged 56.1 since the start of 2013.
BusinessNZ’s executive director for manufacturing Catherine Beard said that while another dip in the level of expansion was not ideal, the sector remains in a solid position.
“Manufacturing activity has now been in expansion for 10 consecutive months, with 2013 remaining on track to be one of the best years for the sector in some time. Also, despite the lower level of expansion, the proportion of positive comments from manufacturers increased slightly from August, with residential building activity throughout the country being one of the drivers.”
BNZ senior economist Craig Ebert said “While manufacturing growth has slowed from the eye-popping 59.4 in July, it is still in better than average expansion. Remember the line in the sand between expansion and contraction is 50.0, so the disappointment is simply that growth is decent rather than very strong.
“A timely check to allay any anxiety is to compare it against the manufacturing component of Tuesday’s NZIER Quarterly Survey of Business Opinion (QSBO). Taken together, the PMI and QSBO signals remain relatively positive.”
Three of the five seasonally adjusted main diffusion indices were again in expansion for September. New orders (58.8) again led the way for September, following consecutive post-60 results. Production (55.5) experienced another slight dip in expansion levels during September, while deliveries of raw materials (54.8) followed a similar pattern. Finished stocks (50.0) were unchanged during September, with its lowest value since April 2013. Employment (48.6) recorded the first decline of any sub-index since April 2013, following consistent levels of expansion for the previous four months.
Expansion was centered more towards the North Island in September. In the North Island, the Central region (58.5) continued to lead the way, given another strong pick up in new orders and production. The Northern region (54.1) recovered slightly after a drop in the level of expansion for the previous month. In the South Island, the Canterbury/Westland region (42.5) had an unusually poor month, with production particularly low. The Otago-Southland region (50.7) also fell back during September, but kept its head above water with a slightly positive result.
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