Manufacturing activity improved enough over December to be back in positive territory, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for December was 51.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 46.0 in November and 46.7 in October. Over 2011 the PMI averaged 51.5, compared with 53.0 in 2010.
BusinessNZ’s executive director for manufacturing Catherine Beard said that although it was pleasing to see a return to expansion for the last month of 2011, overall the year was a challenging one for manufacturers.
“While the average level of activity in 2011 was up on 2008 and 2009, it fell behind 2010’s result. Like the sword of Democles, global uncertainty continues to hover over most manufacturers doing business in international markets. Also, domestic events (both natural and man-made) have contributed to changes in orders and production throughout parts of the year.”
BNZ senior economist Craig Ebert said the positive bounce back in December validated the bank’s view taken in October and November that the negativity in those months was probably over-stated.
“While it’s a relief to see the positive December result, the seasonally adjusted reading of 51.9 can hardly be called strong. There are still lingering reservations around the survey’s details and the industry’s overall inventory management.”
Four of the five seasonally adjusted main diffusion indices were in expansion during December, as opposed to only two in the previous month. Employment (52.7) led the way for the first time since March 2011, while new orders (52.0) increased 5.7 points from November. Finished stocks (51.8) rose 0.5 points, while production (50.0) experienced no change for the second time in four months. Deliveries (49.8) improved 1.6 points over the month, although still in technical contraction.
Unadjusted results by region showed two of the four regions in expansion, along with a large spread of expansion and decline. The Otago/Southland region (65.6) again led the way, although slightly down on November’s result. Both the Northern (51.9) and Canterbury/Westland (54.2) regions also experienced lower expansion levels, while the Central region (42.7) fell further into decline with its lowest result since April 2011.