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Manufacturing sector bouncing back

Manufacturing sector bouncing back

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Manufacturing activity is growing again since coming out of lockdown, although the industry isn’t taking on any new staff.

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Photo: 123RF

The BNZ Business New Zealand Performance of Manufacturing Index for June is well into expansion territory at 56.3 points.

That’s a 16.5 point gain on May and is more than 30 points up on April, when it sunk lower than the lows seen during the Global Financial Crisis.

A reading above 50 points indicates growth, while anything below signals contraction.

The expansion is being led by a surge in new orders, which is driving production and deliveries.

BNZ senior economist Doug Steel said it was good to see a small step forward in activity after the blow the lockdown dealt to the sector.

“Pent up demand is part of it, massive policy support via monetary stimulus and the government fiscal packages including the wage subsidy scheme – these things have certainly helped to set the platform for people to go out and spend when the lockdown restrictions were removed.”

Steel said the weak employment index, which is at 48.5 points, paints a more sobering picture of what is going on in the manufacturing sector.

“The change from May to June was strong but that doesn’t mean all is good in the manufacturing sector at the moment and I think the employment indicator reflects that.

He said employment activity was nowhere near strong enough to repair the damage that Covid-19 has had on the industry.

Looking ahead, Steel said the new orders index would be one to watch, as it signalled what companies were seeing on their order books.

“That will obviously drive activity going forward and, in turn, will dictate what happens in the employment scene.”

The PMI results had the country in a much stronger position compared with other countries New Zealand usually measured itself against, such as Australia, the United States and the United Kingdom.

Steel said this was a turnaround given the New Zealand manufacturing index was tracking a lot lower then these countries when it was in lockdown.

“It seems to reflect the fact we had very tight Covid-19 restrictions and now, obviously, we’ve got some of the loosest in the world.”

Activity also rebounded across all the regions, with Christchurch leading the way at 61.6 points.

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