Manufacturing up after rough patch

00:58, Nov 16 2012

Manufacturing activity levels across Southland and Otago are at their highest level since last December but experts say it may not last.

The October BNZ-Business NZ performance of manufacturing index has the southern regions with a result of 54.0, up 4.2 points on the September reading.

An index reading above 50 indicates manufacturing is expanding; below indicates a decline.

Otago Southland Employers' Association chief executive John Scandrett said the lift was a reflection of how management were looking for new opportunities in what was still a tough economic climate.

Regional manufacturers were quietly confident last month the October result would move into expansion and there had been a solid build of confidence around stock levels, he said.

"There were some signs last month that manufacturers were remaining focused on keeping production outputs ahead of demand.


"This told me that they were quietly holding certain levels of confidence that might not have, at the time, been apparent to all."

Although October survey sub-indices also showed very strong results in production, finished stocks and deliveries, the new orders confidence level took a hit.

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

He said the regional October index ring-fenced strength in food and beverage, wood and paper, and in textile and clothing activity sub-sectors, and it was pleasing to see positive references to sales lifts seen in both export and New Zealand markets.

Selected machinery and equipment activity levels went up and down throughout October, and there was some slowdown in the packaging industry, especially within that producer segment that operated in Australia, he said.

Scandrett was hopeful any lull would be temporary, where a supply and demand imbalance was driving sluggish trading patterns.

Meanwhile, the national seasonally adjusted index for October returned to a minor level of expansion but the 50.5 result showed the sector remained flat.

BNZ senior economist Craig Ebert said the October result gave hope that the sector was stabilising after going through a rough patch in recent months.

"The best way to describe the latest index result is relief, however headwinds for the manufacturing industry still prevail," he said. The NZ dollar remained high, international demand was patchy, and the New Zealand economy was looking a bit bumpy and hesitant, including in employment, he said.

The Southland Times