Manufacturing expands throughout first quarter of 2016

Wednesday April 20, 2016 Fiona Stokes

The surveys that we monitor indicate that manufacturing activity in the first quarter of 2016 continues to expand, although at a slowing rate, and business confidence remains positive. 


The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during March indicates that total sales in February 2016 increased by 64.3 percent.  This large increase compared with February 2015 was due to export sales increasing by almost 75 percent.  However, it should be noted that February 2015 was a particularly low month for manufacturing export sales, which contributed to the large increase.


The various indexes that make up the survey, such as current performance and change, are all above 100 – indicating expansion – and business confidence among those surveyed was up in February compared to January. 


The largest constraint on manufacturers continues to be markets, followed by production capacity, skilled staff, and capital.  Staff numbers have remained fairly stable among those firms surveyed, with a 1.5 percent increase in staff numbers year-on-year.  A moderate shortage in operators/labourers, tradespeople, supervisors, managers, and professionals/scientists was reported among the skilled staff constraints. 


The BNZ-BusinessNZ Performance of Manufacturing Index (PMI) for March also indicates that manufacturing is expanding, although at a slower rate than for February. At 54.7 seasonally adjusted, the PMI shows the lowest level of expansion since October 2015. In addition, the three monthly average is sitting at 55.3, with the indices for new orders (58.7) and production (56.5) above 50.  It should be noted here that a reading above 50 indicates expansion, while a reading below 50 indicates contraction. 


As shown in the figure below, the three-monthly averages for the PMI and employment have been above 50 for some time.  However, the latest figures indicate that the three-monthly average for manufacturing employment dropped below to sit at 49.5. 


perform exports 1


Some negative comments were received from survey participants regarding a slowdown in orders and the potential impact this will have on inventory and employment, but overall sentiment continued to be positive among manufacturers. 


Across each of the regions, the three-monthly average for March 2016 was higher (no Otago looks lower) than that for March 2015, with the manufacturing activity in the Central region leading the way.


PMI exports 2