Manufacturing activity dips in October, too soon to see impact of new government: PMI

Friday 17th November 2017

New Zealand's manufacturing activity dipped in October, although economists say it's too soon to tell whether the new Labour-led government has had an impact.

The BusinessNZ-Bank of New Zealand performance of manufacturing index fell 0.4 of a point to a seasonally adjusted 57.2 in October, extending its run of expansionary readings above 50 in every month since October 2012.

BNZ senior economist Craig Ebert said the index had held at a "solidly expansive level", but with the government proclaimed 19 days into the month, "we might prefer to see how the PMI goes in November and December before awarding any merit certificates. But October’s result was certainly encouraging, as was September’s – bearing in mind the PMI is about the nuts and bolts of activity rather than sentiment about where things might be heading."

Ebert said it was too soon to assume local manufacturing activity has been boosted by recent falls in the exchange rate. The currency has eased about 7 percent since Jacinda Ardern became Labour leader in August, which Ebert said was an over-reaction, but manufacturers "will probably take the moderation in the exchange rate as a favourable upfront consequence of the new government, albeit as they begin to assess how the policy outlook might affect them over the medium term."

Three of the five sub-indices fell, with new orders down 0.6 of a point to 60.1, finished stocks dropping 0.4 of a point to 55, and deliveries falling 0.4 of a point to 57.9. Production rose 1 point to 60.7 and employment was up 0.2 of a point to 51.

Employment had dropped back in September, having been running nicely about the 56.0 mark in July and August, Ebert said, meaning October was "another slow result", and could be a sign that the expansion in manufacturing employment will slow in the December quarter.

The economists are also keeping an eye on food processing, as the volume of dairy and meat processing declined in the September quarter, Ebert said.

(BusinessDesk)

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