Manufacturing continues expansion

Finished sawn lumber at Pan Pac’s Milburn plant, south of Dunedin. Photo: Gerard O'Brien.
Finished sawn lumber at Pan Pac’s Milburn plant, south of Dunedin. Photo: Gerard O'Brien.
Otago's manufacturing sector has touched a 20-month high for July, with strong employment and production levels, but niggles remain with ongoing reports of a shortage of skilled labour.

Otago Southland Employers’ Association chief executive Virginia Nicholls said overall activity in Otago and Southland’s manufacturing sector for July stood at 59.3 points, its  highest

during the past 20 months.  A score of more than 50 indicates expansion and below, contraction.

"The regional breakdown in categories were positive in all bar one category," she said.

The BNZ-BusinessNZ manufacturing index for Otago and Southland showed employment climbing to a high of 70, production levels at 66.7, stocks of finished products 56.7, and new orders 53.3. Only delivery of raw materials was in contraction at 46.7.

BNZ senior economist Doug Steel said with the national score at 55.4 for July, the index remained firmly above its long-term average of 53.3.

"It bodes well for manufacturing GDP [gross domestic product] growth to continue outperforming its long-term average as it has for much of the past three years," Mr Steel said.

Mrs Nicholls said it was "very reassuring" to have both employment and production showing very strong expansion, at 70 and 66.7 points respectively.

"While new orders did not show the same level of growth, it was still in expansion, which should continue to flow through into production in the months ahead.

"Overall, this is very positive news for the local manufacturing sector," she said.

Earlier this month, unemployment fell for the quarter to June, easing from 4.9% to 4.8%, putting further pressure on businesses to find skilled staff.

In the South, this has been a theme  for more than 18 months, with some surveys indicating skill shortages  are one of the largest limiting factors for business growth. Mrs Nicholls said some manufacturers in Otago and Southland were continuing to report a shortage of skilled labour.

Affected areas include tourism, construction, health care and  related service industries, engineers, construction managers, quantity surveyors, accountants and ICT workers.

BusinessNZ’s executive director for manufacturing Catherine Beard said expansion across the five indices was very even for July, with the total difference between the lowest and highest results  only 1.2 points. Of particular note was the highest level of expansion for employment since September 2014, at 56.4 points,  and  finished stocks, also at 56.4. However, both production, at 56,  and new orders, at 55.4, continued to slip in terms of expansion.

Mrs Nicholls said  local respondents reported machinery and equipment manufacturers had experienced a positive month, with demand high and good inquiries.

"Some are also benefiting from the continued work on the large irrigation projects," she said.

Manufacturers supplying the construction industry, including metal product and wood manufacturing, were also reporting another positive month.

"Large food manufacturers have had good market demand, along with positive seasonal production," Mrs Nicholls said. 

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