Construction assisting Otago

Virginia Nicholls.
Virginia Nicholls.
Supplying Otago’s construction sector is underpinning  a resurgence in Otago’s manufacturing sector, but with mild headwinds from foreign exchange issues and lack of staff.

Nationally, the BNZ-BusinessNZ performance of manufacturing index for February moved up three points to 55.2, while Otago leapt  10.2 points from January to 52.8 value points for February. Scores above 50 denote expansion and below, contraction.

This week, national gross domestic product (GDP) came in surprisingly weaker than expected for the quarter to December, at 0.4% growth, against expectations ranging from 0.5% up to 1%. That softness was blamed on the primary sector, because of several issues with a wet spring, and to some extent transport interruptions following the November Kaikoura earthquake.

During the week, Otago slipped from first place on the ASB regional economic scoreboard to seventh of 16,  mainly because construction and tourism were already near capacity so further growth was difficult to achieve.

Otago Southland Employers’ Association chief executive Virginia Nicholls said yesterday activity in Otago and Southland’s manufacturing sector had gained some momentum in February after having been adversely affected by the holiday period in December and January.

"The manufacturing for construction of domestic and commercial buildings has continued to hold up well in Otago. The regional breakdown in categories were all positive," she said.

The sub-index of stocks of finished products was 59.4, production levels, deliveries of raw materials and employment levels were at 53.1, but new orders for Otago Southland were "lacklustre" at 50.

"Metal product manufacturing has continued to thrive, supplying New Zealand and international markets," Ms Nicholls said.

However, some exporters to Australia were finding the exchange rate was continuing to have a negative effect on sales.

"Some manufacturers are reporting they’re continuing to find it difficult to find skilled staff.," Ms Nicholls said.

Nationally, the seasonally adjusted index for February was 55.2, three points higher than January, and reflected the highest level of expansion since September 2016, BusinessNZ’s executive director for manufacturing Catherine Beard said.

"It was pleasing to see the sector pick up after January’s dip, due to mostly seasonal factors.

"Overall, the sector has remained in expansion in almost all months since October 2012," she said in a statement.

While some respondents continued to outline negative seasonal factors impacting their overall activity levels during February, the 61.7% of positive comments received pointed to increased orders, both at a domestic and offshore level, Ms Beard said.

BNZ senior economist Craig Ebert said February’s index gain was "particularly encouraging" in suggesting the weak manufacturing result we saw in the earlier GDP report was transitory "rather than the start of a genuine struggle".

"We have built in a decent rebound in first quarter’s manufacturing GDP and the manufacturing very much supports this," Mr Ebert said.

However, he noted the industry detail of the index was extremely varied.

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