The Bank of New Zealand – Business New Zealand Performance of Manufacturing Index (PMI) stood at 48.7 in August, down 0.9 points from July (49.7) but up 2.5 points from June (46.2) and 5.6 points from May (43.1). This result is an improvement year-on-year, but indicates that manufacturing activity in New Zealand remains in contraction as a PMI reading below 50 indicates manufacturing activity is contracting.

Four of the five seasonally adjusted sub-indexes measured recorded a contraction, with employment (46.9), deliveries (48.0), finished stocks (48.7) and production (48.8) recording values below 50. Three of the five seasonally adjusted sub-indexes measured also recorded an improvement on the previous month. Production recorded a result poorer than the previous month, down 2.2 points from the 51.0 recorded in July. The new orders sub-index was also down in August, by 4.8 points, from the 55.1 recorded in July.

Finished stocks improved 6.1 points on the previous month, while employment improved 2.9 points. This is the highest value recorded for the seasonally adjusted employment sub-index for 2009, but as indicated in the figure below, this index has been below 50 for some time. The deliveries sub-index recorded a slight improvement from July, up 0.4 points to 48.0 in August.

Looking at manufacturing activity by industry sub-group it can be observed that food, beverage and tobacco manufacturing rose 4.5 points to 56.3, while the petroleum, coal, chemical and associated products sector experienced a sharp fall to 46.8.

The three-monthly average for the PMI improved in August to sit at 48.0, up from the 45.3 recorded in July. All three quarterly average indicators have improved, with new orders again showing the strongest result, up 3.6 points. Over the last three months, employment has averaged 43.2, an improvement on the previous quarters but still below the three monthly average seen in August 2008 (45.3). However, the last time the three-monthly average for the employment index in August was above 50 was in August 2005 when it stood at 50.4.

Turning to the regions, the unadjusted activity for August was a mixed result, similar to what we saw in July. The Central (52.3) and Canterbury (56.4) regions recorded an expansion in manufacturing activity while activity in the Northern (47.3) and Otago (48.2) regions contracted. Comparing month on month, the Otago region lead the way with an improvement in manufacturing activity of 8.4 points. While the Northern and Central regions slipped slightly, down 0.1 points and 0.4 points respectively.