South’s manufacturing dips

Virginia Nicholls
Virginia Nicholls. PHOTO: ODT FILES
A dip in manufacturing activity in Otago and Southland last month cannot be taken as a trend, Otago Southland Employers Association chief executive officer Virginia Nicholls says.

The performance of manufacturing index (PMI) for the region for December was 47.7 points, a decline from the previous three months.

An index reading above 50 points indicates that manufacturing is generally expanding; below 50 it is declining.

"It has been relatively steady for the last three months," Mrs Nicholls said.

"It is a bit of a disappointment to have it drop in December but it very much could come up."

Mrs Nicholls cautioned against reading too much into one month’s results for the sector, particularly in this environment.

She hoped January and February figures would start to move up into the 50s.

"After that, if it was still the same, you would be concerned at that stage."

The region’s manufacturing activity had rebounded into the 50s for the three months before December, which followed a drop in August to 37.9 points.

"December there was obviously some uncertainty for them to go into negative territory."

The drop might have been because manufacturers were about to shut down for Christmas, she said.

The regional breakdown by categories showed production levels, employment levels and deliveries of raw materials were above 50.

New orders and stocks of finished products were lower than 50.

"It is concerning to see new orders in decline," Mrs Nicholls said.

"Some of our machinery and equipment manufacturers are experiencing a decline in future orders."

Residential construction was busy and the apprentice boost scheme was working well, but there were some significant shortages of skilled tradespeople.

Thanks to buy local campaigns, people were taking more notice of where their food was coming from.

"I think that is a great thing for our local manufacturers in the food game."

Manufacturers were holding more stock because of problems with importing, which affected cash flow, she said.

Port Otago and South Port were handing imports well but Auckland was struggling.

"To be fair, if you are importing something from Europe at the moment there are delays which are nothing to do with New Zealand ports."

The Government international airfreight subsidy for key export markets would end after March.

With the supply chain issues, it was imperative the subsidy was extended to continue to support exporters, she said.

Nationally the PMI fell six points in December to 48.7.

BNZ senior economist Doug Steel said the result was disappointing but not completely surprising.

It followed six consecutive months being above the expansionary 50 mark, including an above-average reading of 54.7 in November.

bruce.quirey@odt.co.nz

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