Manufacturing dips but region still top

MANUFACTURING in Otago and Southland has posted a monthonmonth dip but still tops the country and remains firmly in expansion mode.

Southern aluminium boat makers, food processors and exporters are all reported to be enjoying good sales.

Nationally, the Performance in Manufacturing Index (PMI) rose 0.4 points to 57.7 in November, OtagoSouthland recording 66.6, the midlower North Island 63.4, upper North Island 62.3 and CanterburyWest Coast 60.3.

At 57.7 points New Zealand’s PMI was second only to the euro zone’s 60, and slightly higher than the UK and Australia.

Index scores above 50 denote expansion, and below, contraction.

OtagoSouthland’s 66.6 was down from 69.5 in October but was still well above the average for the past year of 56.2, according to the BNZBusinessNZ monthly manufacturing index released yesterday.

OtagoSouthland remained firmly in expansion, all subindex categories scoring between 55.9 and 76plus.

OtagoSouthland started the year on 42.6, but steadily rose through the mid50s to hit more than 60 in each of the past four months.

Otago Southland Employers’ Association chief executive Virginia Nicholls said it was encouraging to see the categories of employment levels and new orders were once again over 60 on the index.

The categories matched the high overall score, with production levels at 76.5, deliveries of raw materials at 67.6, new orders at 64.7, employment levels at 61.8 and stocks of finished products at 55.9.

‘‘The food processors are busy supplying the Christmas market and those exporting are reporting good sales.’’

Mrs Nicholls also singled out the aluminum boatbuilding sector as having ‘‘very good’’ early summer sales.

ManufacturingNZ executive director Catherine Beard there had been a ‘‘relatively tight band of expansion’’ during the past four months.

‘‘The sector is heading towards a stronger second half of the year,’’ she said.

BNZ senior economist Doug Steel said while other recent surveys had seen a faltering in business confidence, the manufacturing index had in recent months ‘‘remained rock solid’’.

‘‘In the November details, production led the charge with the index punching up to a very strong 62.1, its highest level since mid2013,’’ Mr Steel said.

This followed an already firm 60.9 reading in October and an average of 59 in the three months to September, he said.

‘‘It all supports the idea that manufacturing GDP has accelerated in the final quarter of the year, after what looked like a solid third quarter.’’

However, possible vulnerabilities worth monitoring included the further lift in the manufacturing inventories index to its highest level since the survey started in 2002.

‘‘In the first instance, we take this as a positive sign on the thinking that firms have positive expectations for demand,’’ he said.

Another cloud on the horizon is a skills shortage in the construction sector, an underlying issue which has been gaining momentum over the past year.

Mrs Nicholls said there was continuing pressure to get skilled staff in the construction industry.