Manufacturing activity in Otago and Southland has slipped
into contraction territory but Otago-Southland Employers
Association chief executive John Scandrett has found a small
portion of comfort from history.
The May BNZ-BusinessNZ performance in manufacturing index
(PMI) showed the Otago-Southland reading at 48.1, by far the
lowest of the four regions surveyed. The national
seasonally-adjusted reading was 52.7, northern was 57.4,
central was 56.4 and Canterbury-Westland was 56.7.
The New Zealand figure was an 18-month low but still remained
in positive territory. Above 50 means expansion and below 50
''Although we were happy at the time to see our March and
April regional PMIs remaining in expansion, there were signs
then sector activity was slowing.
''With the May result at 48.1 points, we have had to
recognise we've now actually slipped marginally into
contraction mode. While this is disappointing, we can
probably take a small portion of comfort it is the first time
it has occurred since April 2013,'' Mr Scandrett said.
The usually solid food and beverage planks of the local
manufacturing platform had seen negative activity, largely
due to some seasonal factors and the currency challenges
placing pressure on the normally buoyant sub-sector
On the bright side, textile and clothing performance did not
appear to have experienced May slippage and a local boat
manufacturer had reported positive outcomes from
participation in a recent Auckland marine products
exhibition, he said.
Within the May sub-indices, production and new orders were
tracking at a relatively slow pace and consistent with the
survey sentiment overall.
''There's a clear build on finished inventory levels,'' Mr
BNZ senior economist Craig Ebert said the slowdown in April's
PMI was put down to volatility and the likelihood of
The further moderation registered in May - down to an
18-month low of 52.7 - came as a surprise.
''While we wouldn't describe it as concerning, it is
certainly something to note.''
Large chunks of the PMI remained encouraging. The production
index stayed stout and the employment index held up well.
While some weakness did appear in Otago during the months,
and the industries of printing, publishing and recording,
along with non-metallic mineral product manufacture, there
did not seem to be a pervasive weakness creeping in across
industry type, firm size or by way of region, he said.
''Not so encouraging has been the interplay between falling
new orders and rising inventory which has us wondering about
the extent of growth we can reasonably expect in the
The slower tone of the PMI suggested economic growth of 4%
for the year ended June, slowing to 3.4% next year, Mr Ebert
There were sill some big economic forces acting to propel the
New Zealand economy forward. While the further slow down in
May's PMI warranted attention, many factors remained
promising to underpin the local manufacturing sector over the
coming year or two, he said.