Vital Statistics
21 Aug 2007
Manufacturing activity consolidates in April with a 2.6 point drop in the PMI
Fiona Stokes
Manufacturing activity consolidated in April with a 2.6 point drop from the previous month according to the Business NZ Performance of Manufacturing Index (PMI). Reasonably strong growth has been experienced in manufacturing activity over the last six months, so this drop in the PMI should be seen as a slowing down rather than a sign of decline. This is evidenced by the current level of the PMI of 56.8, where a level above 50 indicates a situation of expansion. Four out of five indices showed expansion in April with employment being the only indicator in decline. Production (54.2), new orders (56.6), finished stocks (55.7) and deliveries (53.9) were all above 53 points, a drop from March but still positive. Employment dropped from 49.7 in March to 49.2 in April.
The high NZ$ remains a hot issue for manufacturers, but a number of manufacturers also report they were unable to expand production due to ongoing staff shortages.
Training initiative
One industry scheme that aims to address ongoing staff shortages is a trans-Tasman training initiative called Competitive Manufacturing. This initiative aims to invest in skills and training, as well as increase manufacturing performance and productivity. It is being driven by the Industry Training Organisations (ITOs), who set qualifications for the manufacturing sector. Competitive Manufacturing involves a number of qualifications and training schemes to equip workers with transferable skills and encourage more people to enter manufacturing as a career.
Offshore orders
In addition to the high NZ$, manufacturers report the following factors as biting into their profitability: interest rates, the weather, a slowing down in demand and rising costs. However, some manufacturers report they are increasing offshore orders despite a high NZ$.
In Export Year 2007, this last point of increasing orders despite the exchange rate is worth reflecting on. In 1960, more than half of New Zealand’s exports went to Britain. In 2007, about 70% of New Zealand’s goods and services are sold to the 21 members of APEC (Asia Pacific Economic Cooperation). New Zealand now exports to more than 200 countries and territories.
What we export is also slowing changing but our focus on primary products remains sharp. Unprocessed and processed primary products continue to dominate New Zealand exports. In April 2007, the greatest expansion in the manufacturing industry was in food, beverage and tobacco manufacturing. However, the export of primary products now includes natural products such as manuka honey as well as frozen lamb.
New Zealand natural products or nutraceuticals is a sector built on agriculture and food technologies. Nutraceuticals is a promising area that now returns around $300 million in exports annually. This sector has major markets established in Asia and North America and is now attempting to break into Europe.
Two companies involved in this sector are household names in New Zealand, Comvita Ltd. and Healtheries of New Zealand Ltd. Comvita Ltd., a Bay of Plenty manufacturer, produces therapeutic apicultural products and achieved export sales of $18.7 million in 2005. This company recently won the New Zealand Trade and Enterprise (NZTE) award for the export category of Agritechnology, Life Sciences and Biotechnology. Healtheries of New Zealand Ltd. is based in Auckland and in turn won the Food and Beverage Exporter of the Year award. Export sales for this company in 2005 were $21.5 million.
Both of these companies are healthy recipes for export success, food for thought in Export Year 2007.
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