Region retains PMI top spot

Otago-Southland manufacturers have easily retained their top ranking in the latest BNZ-BusinessNZ performance in manufacturing index and there are indications of more good news to come.

The region scored 56.4 points in the January PMI, well ahead of next-placed Northern on 53.1, Canterbury-Westland on 53 and Central on 48.8. In January last year, the Otago-Southland PMI was 48.1. The seasonally adjusted New Zealand PMI was 56.2.

A reading above 50 indicates expansion and below 50, contraction.

Otago-Southland Employers Association chief executive John Scandrett told the Otago Daily Times it was noteworthy January new orders were strong at 66.7 points and deliveries were trailing at 52.8.

''This may provide an indication that in February, and beyond, the present expansionary trends will prevail.''

He was satisfied the solid regional PMI for January reflected continuing confidence in the sector even though there were marginal slowdown signs across selected food and beverage, light industry and machinery operations.

Wood and paper product manufacturing overall tended to be demonstrating signs of sluggishness, but one operator in the sector expressed confidence that leveraged off a large contract in process, Mr Scandrett said.

BNZ economist Doug Steel said the manufacturing sector had started the year by expanding firmly.

''Manufacturing growth continues despite the general strength of the New Zealand dollar and the particular recent strength we have seen in the local currency against its Australian counterpart.''

It would be easy to understand if the PMI had lost some heat in January, given the more than 14% rise in the NZ-Australian dollar cross rate in the past 12 months. But the PMI had barrelled on, he said.

The dollar was still causing concern, many survey respondents noting the strength of the dollar as a negative influence on their activity. Others noted the slowdown in Australia as generally a drag on business.

Such results were expected given Australia accounted for around 50% of New Zealand's total manufactured exports, including processed primary products.

What was more surprising was many other respondents commented on Australia as being a source of improvement, some noting outright strength, Mr Steel said. It fitted with the recent bounce in Australian business confidence, he said.


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