NZ manufacturing in decline

New Zealand’s manufacturing sector has declined in overall activity for the first time in over two years, according to the Bank of New Zealand-Business NZ Performance of Manufacturing Index (PMI).

The PMI for March was 48.3 (seasonally adjusted), 3.5 points lower than February.

It was the first time it has declined since January 2006 and was the lowest result since November 2005.

The average PMI since the survey began in 2002 is 54.4.

A PMI of 50 indicates the sector is generally expanding, below 50 indicates decline.

Business NZ chief executive Phil O'Reilly said the result highlighted a "lacklustre" first quarter of activity for New Zealand's manufacturing sector.

"Looking out towards business possibilities for New Zealand manufacturers during the rest of 2008, it will be important they start engaging in potential markets in China to take advantage of the significant opportunities that are available now and that will become available as tariffs reduce further in the near future.”

O'Reilly said comments from respondents showed a lack of confidence in the market, with the proportion of negative comments made by respondents jumping strongly — 67.3% in March compared with 63.7% in February.

BNZ senior market economist Craig Ebert said much of the concern related to obvious factors, such as the ongoing strength of the NZ dollar, cost pressure, resource constraints and weakening domestic demand.

"But there is another factor well worth noting: offshore demand. It is slowing already, and will probably continue to do so for the foreseeable future,” he said.

Unadjusted results for the manufacturing industries were generally in decline during March.

The machinery and equipment sector (53.4) bucked the trend with the only expansion shown for an industry.

The wood and paper product sector (38.8) displayed the strongest level of decline, followed by the textile, clothing, footwear and leather sector (43.0).