Industry activity surges

Signs of growth off low base

MANUFACTURING took a huge step up in February with a ‘‘stunning’’ lift in activity, though from a low base.

In the strongest performanceof-manufacturing-index result in two years, the index leaped from a timid 50.8 in January to 57.7 in February. The PMI has been higher only twice in the past seven years.

‘‘It is one out of the box,’’ according to Bank of New Zealand economist Doug Steel.

An index above the 50 mark indicates that manufacturing is generally expanding.

The manufacturing sector was harder hit than most in the 2008-09 recession, with real GDP in the sector down 20 per cent from the peak in 2005, to a trough in 2009, so the latest PMI figures are coming off a low base.

Manufacturing jobs slumped from about 288,000 in 2004 to a trough of 239,000 in 2009. Since then they have recovered to about 257,000, still well below the peak.

The latest PMI figures suggest manufacturing companies would hire more staff this year, ‘‘but not a whole lot’’ Steel said. ‘‘It could pick up on rising new orders’’.

Business New Zealand warned that it remained to be seen if the February PMI marked a true turnaround for the sector, after four poor months.

The February 2012 result was the highest February value for activity since the survey began in 2002. Steel said the February PMI result was ‘‘a very strong reading with a lot to like in the details’’.

‘‘But it is only one month, and in the context of a generally low level of manufacturing activity in recent years, we see it as early signs of growth off a low base.’’

The PMI showed a couple of negative months last year and only mildly positive results in recent months, suggesting manufacturing was on a positive trajectory. BNZ hoped to see if there were signs of optimism in construction or if commodity export cash was starting to filter through