Manufacturing activity still strong in the South

Manufacturing took a dip in the South in May, but some exporting manufacturers are still making...
Manufacturing was strong through November in Otago and Southland. The Laust Maersk (pictured) is being loaded with containers at Port Chalmers. Photo by Stephen Jaquiery.
Manufacturing activity in Otago and Southland remained strong in November, coming in at the second-highest level of the year as measured by the BNZ-BusinessNZ Performance of Manufacturing Index.

The Otago-Southland reading was 57.1 points  (a reading above 50 shows an industry in expansion). The highest reading of the year for the region was 58.6, recorded in October.

The index showed manufacturing remained strong throughout New Zealand. The EMA reported 62.9,  Business Central reported 58.4, the Canterbury Manufacturers Chamber of Commerce reported 57.7 and the Otago-Southland Employers Association’s reading was 57.1.The national seasonally adjusted PMI was 54 points, a 13-month low.

Otago-Southland Employers Association chief executive Virginia Nicholls said regional employers were reporting strong production. New orders and deliveries were both at 60.5 and new orders were up by 7.4 from October, which was encouraging.

Finished stocks were down slightly on last month at 57.9 and at 44.7 employment had gone into contraction since October. That might be due to the seasonal nature of manufacturing at this time of the year, she said.

"Food manufacturers providing perishable products to supermarkets are very busy. There are some good pre-Christmas orders for the tourist trade in textiles, clothing and gifts, although there is some competition with cheaper exports."

Manufacturers supplying wood products for residential and commercial buildings were busy. There were good opportunities for pricing jobs next year, Mrs Nicholls said.

BNZ senior economist Craig Ebert said the  PMI’s 13-month low was nothing to lose sleep over, once it was put in perspective and  the details were examined.

Even at 54.4, the PMI was above its long-term average of 53.2. While the employment index sagged to 48.6,  like the August result of 47.1, it was judged as rogue.

"We don’t see signs elsewhere manufacturers are cutting jobs — quite the opposite."

The other weak part of the PMI was in stocks of finished production. That did not look to be a sign of caution with the PMI new-orders index "pumping away" at a seasonally adjusted 58, he said.

November’s earthquakes would disrupt or displace some business activity. But they would also reinforce  the conviction certain construction needed to be carried out.

"This is something to bear in mind, particularly for Wellington where earthquake damage to buildings has been perhaps under-appreciated. In this vein, it was interesting that of all responses to November’s PMI, only two cited the recent earthquakes as a negative factor. Far more referenced construction as a positive influence on business."

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