Blue skies for manufacturing sector

Last updated 12:13 14/06/2013

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May was the busiest month for manufacturers in almost nine years, with an improving building and construction sector, a lift in overseas orders, and more new customers.

The latest BNZ-BusinessNZ Performance of Manufacturing Index hit 59.2 points in May, indicating the highest level of expansion since 2004.

A reading above 50 shows the sector is expanding and under 50 that it is shrinking.

Compared with previous May figures, the result this year was the highest since the survey started in 2002.

BNZ Economist Doug Steel said that PMI results did not get much bigger than this, even globally.

"The pick-up is material. It puts upside risk to our manufacturing and overall economic growth forecasts over coming quarters," he said.

"The strong result essentially gives us more confidence that the recent and forecast upswing in construction activity will flow through to manufacturing activity, with the usual lag."

BusinessNZ's executive director for manufacturing Catherine Beard said the May result showed strong activity in key aspects of the sector, with new orders and production expanding. Employment also picked up, after a long period in the doldrums.

The strong result was reflected in comments from businesses surveyed, which were more than 58 per cent positive, the best this year.

A number of these comments outlined the improving building/construction sector, increasing offshore orders and new customers/opportunities for their business.

"The mood of the sector is typified by one respondent noting that after five years they now feel confident enough to hire extra staff," Beard said.

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