The surveys that we monitor indicate that manufacturing activity remains in contraction. The Bank of New Zealand – Business New Zealand Performance of Manufacturing Index (PMI) stood at 49.7 in July, up from the 46.2 recorded in June and 43.1 recorded in May. This result is an improvement, but indicates that manufacturing activity in New Zealand remains in contraction as a PMI reading below 50 indicates manufacturing activity is contracting.

Three of the five seasonally adjusted sub-indices measured recorded a contraction, with employment (44.0), finished stocks (42.6) and deliveries (47.6) recording values below 50. The only seasonally adjusted sub-indice to record a result poorer than the previous month was finished stock, down from 43.9 recorded in June. Deliveries improved 5.1 points on the previous month, while production improved 3.4 points. The employment indice bounced back 3.9 points, but is below the seasonally adjusted figure seen in July 2008 of 46.0. And as indicated in the figure below, this indice has been below 50 for some time. 

The three-monthly average for the PMI improved slightly in July to sit at 45.3, up from the 42.3 recorded in June. All three quarterly average indicators have improved, with new orders showing the strongest result, up 5.3 points. Over the last three months, employment has averaged 42.0, a slight decrease from previous quarters and below the three monthly average seen in July 2008 (46.3). However, the last time the three-monthly average for the employment indice in July was above 50 was in July 2004 where it stood at 52.2.

Turning to the regions, the unadjusted activity for July was a mixed result.

The Central (52.7) and Canterbury (54.9) regions recorded an expansion in manufacturing activity while activity in the Northern (47.4) and Otago (39.8) regions contracted. Comparing month on month, the Otago region slipped 9.0 points while the Northern, Central and Canterbury regions saw an improvement in manufacturing activity, with 5.7, 8.0 and 6.1 point improvements from June figures.

This is the first time in 2009 that manufacturing activity at a regional level has shown signs of expansion. The Canterbury region has had figures below 50 since November 2008, indicating a period of contraction, while the Central region has not seen an expansion in manufacturing activity since May 2008.