Supply imbalances hit manufacturers

John Scandrett
John Scandrett
Otago and Southland manufacturers have booked a positive spike in activity for October, but the supply and demand imbalance of goods remains precarious.

During the past three months, Otago Southland's manufacturing sector has been a roller-coaster; from expansion, contraction and back to expansion.

In the Business New Zealand performance of manufacturing index for October released yesterday, Otago Southland leapt 4.2 points to 54.0 value points - its highest result since last December.

The national index had a similar point gain to Otago Southland, of 4.1, but that was only enough to propel it to 50.5.

Historically, the national index makes for uninspiring reading, as over the past quarter the index has averaged 48.8 in contraction, and for the year to date averaged 51.2; just in expansion territory.

Otago Southland Employers Association chief executive John Scandrett said the southern region felt a "bumpy ride" in selected machinery and equipment activity levels and also saw some slowdown in the packaging industry, especially within the producer segment operating in Australia.

"Hopefully, these are just temporary lulls where supply and demand imbalance is driving the currently sluggish trading patterns," Mr Scandrett said.

The October survey sub-indices delivered "very strong" results in production, finished stocks and deliveries readings, but the new orders confidence took "a hit", now sitting at only 36.1 points.

"I think we can confidently take from this that once again, our manufacturers can pretty accurately read their forward market conditions, and after this strong October spike, there will perhaps be a slowing in demand," Mr Scandrett forecast.

Business New Zealand executive director for manufacturing Catherine Beard said while any return to expansion was obviously positive news, no-one should think this is the immediate start of better times ahead for the sector.

"Looking at the history of the survey, we've just come out of the longest consecutive period of contraction since 2009," she said in a statement yesterday.



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