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Manufacturing rallies with help from Aussie neighbours

There would be plenty of reasons for the manufacturing sector to slow down, but it’s holding up nicely, according to the latest PMI stats.

There would be plenty of reasons for the manufacturing sector to slow down, but it’s holding up nicely, according to the latest PMI stats.

The manufacturing sector is seeing a steady level of expansion, the BNZ-BusinessNZ Performance of Manufacturing Index for June suggests.

The seasonally-adjusted PMI for June was 54.3, where a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 and it is declining. Although this was slightly down on the May result of 54.7, combined it accounts for the strongest two months of manufacturing activity since early 2010.

BusinessNZ’s executive director for manufacturing Catherine Beard says this can be partly attributed to what’s happening across the Tasman.

“Many of the positive comments by manufacturers have centred on increased orders and sales from Australia given the competitive exchange rate at present,” she says.

“While issues such as the ongoing effects from earthquakes and the economic downturn are still mentioned, the Australian situation is as least providing a valuable market opportunity for businesses looking to broaden their sales base.”

BNZ economist Doug Steel says the ongoing growth is “fundamentally encouraging”.

“Export growth is holding up despite its many threats, including the strength of the currency, and domestic manufacturing sales look likely to strengthen with the wider economic recovery we foresee. All up, this survey gives a sense of sure and steady improvement.”

Four of the five seasonally-adjusted main indices were in expansion during June, with deliveries (56.1) again leading the way, followed by new orders (55.6) and production (52.4). Employment (51.7) experienced its second consecutive increase in expansion, while finished stocks (48.4) continued to slip lower.

Unadjusted results by region showed three of the four main regions in expansion, with the northern region (55.2) leading the way, followed by the central region (53.9). The Canterbury/Westland region (53.9) dropped 5.6 points from May, although encouragingly remained in expansion. In contrast, the Otago/Southland region (41.3) sunk deeper into contraction during June, with five consecutive months in contraction.