Gloom lifts for manufacturing

Last updated 12:48 14/02/2013

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Manufacturing activity perked up sharply in January, with a survey showing it moved well into expansion, but employment in the sector remains under pressure.

The latest BNZ-BusinessNZ Performance of Manufacturing Index (PMI) rose to 55.2 points, seasonally adjusted, up almost five points from December.

A figure above 50 indicates that manufacturing is expanding and below 50 that it is contracting.

At 55.2, the index was at its highest point since May 2012. For January, it was the best result since 2007, before the global financial crisis hit.

Manufacturers supplying the construction sector were seeing more positive signs with a lift in building work, but those supplying the Australian market were concerned about the slowdown in that economy.

BusinessNZ's executive director for manufacturing, Catherine Beard, said the January result was "heartening". 

However, the manufacturing employment index (48.4) fell back from December, and has now remained in contraction for eight consecutive months.

"Recent headlines have concentrated on various job losses in the sector. This is also reflected in our employment index, which has remained in contraction for eight consecutive months," she said.

Early this year, Norske Skog decided to close one of two newsprint machines at its Kawerau mill, laying off about 110 staff, as demand for newsprint flags. Most recent Household Labour Force Survey figures showed a total of almost 240,000 people in manufacturing jobs in the December quarter, down from about 257,000 a year before.

But broader results show that job losses do not equate with overall declines in activity, as three of the last four months have shown growth in the sector.  

"Also, a healthy lift in new orders for January, along with continued recovery work in the Canterbury region, should assist production levels in the months ahead," she said.

Beard said it was too soon to say whether this year would be better than 2012. However, the JPMorgan Global Manufacturing PMI was at a 10-month high in January, with expectations that this may strengthen further in the next few months. 

In New Zealand, the sub-indexes showed production (57.7) leading the way, closely followed by deliveries (57.6).  

Finished stocks (56.1) recovered from its decline in the previous month to record its highest value since October 2007. New orders (55.8) also recovered from a decline to record a level of expansion equal to that of May 2012. 

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