Mid-year Middling

Manufacturing activity produced a mid-year flat patch, which was in line with offshore movements, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for June was 50.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).  This is 5.6 points down from May and the lowest June result since 2009.  For the first half of 2012 the PMI has averaged 52.7, which was exactly the same for the corresponding time period in 2011.

BusinessNZ’s executive director for manufacturing Catherine Beard said although a similar result to May would have been preferable, the offshore direction of manufacturing underlines some tough headwinds at present.

“The fall in the level of expansion for June was not strong enough to throw New Zealand manufacturing back into decline like it did in April, although the move to the middle does not inspire much celebration.  Looking beyond our shores, the JP Morgan Global PMI fell to a three-year low of 48.9 in June, which was due to inventory adjustments driving contraction.  In fact, global manufacturing activity has seen a steady decline since the start of 2011, while New Zealand has managed to keep on a fairly even keel during that period, managing to keep its head above water.  

BNZ Economist Doug Steel said, “While the June PMI details were mixed, the overall trends remain positive and indicate manufacturing made another positive contribution to GDP growth in Q2.”    

Despite the fall, three of the five seasonally adjusted main diffusion indices were still in expansion in June.  This was led by new orders (51.2), followed by production (50.8).  Finished stocks (50.3) were the only other main index to experience expansion, with three consecutive months of close results.  Employment (48.9) experienced contraction in June, and only its second in 10 months.  Deliveries (46.5) dropped 5.5 points from May to its lowest level of activity since October 2011.

Unadjusted results by region showed far less variation in activity levels during June.  The Northern region (50.7) led the way, although down 8.1 points from May.  The Otago/Southland region (49.8) remained almost identical to its result for May, although just slipping into contraction.  The Central region (48.0) increased 3.5 points from the previous month, while the Canterbury/Westland region (46.7) continued to show its volatile nature with a drop from 61.3 in May.

Click here to view the June PMI
Click here to view seasonally adjusted & unadjusted time series data