Manufacturing still strong

New Zealand manufacturing activity finished 2016 above its long-term average, unchanged in December from a month earlier.

The Bank of New ZealandBusinessNZ performance of manufacturing index was unchanged at a seasonally adjusted 54.5 last month from November, with three of the five sub-indices rising. A reading of 50 separates expansion from contraction, with the long-term average at 53.2. The PMI averaged 56 throughout the year, the second-highest annual average since the survey began in 2002, surpassed only by 2004’s average of 57.5.

New Zealand’s manufacturing sector has been in an almost continuous expansion since October 2012, barring a blip in January last year when the PMI slipped into contraction with a reading of 49.8. The economy has been buoyed by a construction boom that started in the post-earthquakes Christchurch rebuild and has extended to Auckland’s housing market.

The positive sentiment was supported by the latest quarterly survey of business opinion (QSBO) released on Tuesday, with manufacturers more upbeat in the three months to December 31. However, BNZ economist Doug Steel said a decline in the PMI’s new orders subindex, falling 5.2 points to 52.6, was a warning. “Sure, it is still indicating growth (being above 50), but it is the lowest level of new orders for nearly two years,” Steel said. —