The index showed the Otago-Southland region’s activity in December at 49.2 points, down 8.8 points from the same month in 2015 — the third-lowest level of activity for 2016.
An activity level above 50 indicates general expansion and below 50, a contraction in activity.
EMA Northern had the highest level of activity on 60.4 points, followed by Business Central on 56. The Canterbury Employers Chamber of Commerce had the lowest level of activity on 49 points.
Otago-Southland Employers Association chief executive Virginia Nicholls said the figures needed to be seen in context. The average in Otago-Southland manufacturing during 2016 was 53.2, which although down on the 2015 average of 56.2, still showed positive activity.
"The proportion of positive comments in December were 67% as Christmas had a positive influence."
New orders in the region were positive at 56.7 and production was steady at 50. Employment and deliveries fell to 46.7 and finished stocks were low at 33.3.
"Finished stocks this low are not a concern as this is a typical seasonal effect for the end of the year with businesses running down stock for Christmas."
On a positive note, new orders were in a healthy position, which should flow through to production and stock levels in coming months, Mrs Nicholls said.
Food and beverage manufacturers supplying perishable products to supermarkets for Christmas reported good sales. Manufacturers supplying longer shelf life food and beverage products to supermarkets were traditionally quiet at that time of the year.
There was a pre-Christmas rush for souvenirs supplied to the tourist market and metal product manufacturers were continuing to have good sales in New Zealand and strong export sales.
Suppliers to the construction industry were reporting a steady month, she said.
The seasonally adjusted index for December was 54.5, the same as November and the joint lowest expansion level since October 2015.
ManufacturingNZ executive director Catherine Beard said although December’s result did not show improvement from November, the overall result for 2016 was encouraging.
Activity in the manufacturing sector last year averaged out at 56, up from 54.2 in 2015 but the same result as both 2014 and 2013.
"Overall, this shows how consistent and positive activity has been for the sector over the last few years. In addition, the proportion of positive comments stood at 70% for December, with seasonal factors — particularly Christmas — having a strong influence."
BNZ senior economist Craig Ebert said the confidence shown in the Performance in Manufacturing Index (PMI) was supported by the latest Quarterly Survey of Business Opinion (QSBO), where most key manufacturing indicators were above the long-term average — and even more so for the economy-wide indicators.
The PMI and QSBO both suggested manufacturers enjoyed reasonable growth, particularly in production, in the final quarter of 2016.
But some details spelled a warning. PMI new orders fell to 52.6% in the quarter.
"Sure, it is still indicating growth, but it is the lowest level of new orders for nearly two years. This is worth watching as an indicator of sales growth ahead."
The industry’s new orders also slowed in the QSBO. The other potential warning came from large firms, whose PMI new orders slumped to 44.9 in December, Mr Ebert said.
Such moves had been seen before, only to bounce back in the next month. December and January data were more difficult to trust as an indicator of a trend as it was the holiday period.
A reason not to be overly alarmed by softer new indicators was the overall upbeat outlook from manufacturers, he said.
At a glance
• Otago-Southland manufacturing activity still positive last year.
• New Zealand manufacturing activity lower, but still expanding.
• Low finished stocks part of seasonal effects.
• Overall upbeat attitude from manufacturers.
