A PMI reading above 50.0 indicates that manufacturing is generally expanding, while a reading below 50.0 indicates manufacturing is declining.

The July 2007 PMI was not as high as figures recorded in March or May of this year, but higher than previously recorded figures for July. For example in July 2006 the PMI was 53.8, July 2005 the PMI was 49.6, and in July 2003 the PMI 53.1. The only exception to this is July 2004 where the PMI was 59.0.

 

Unadjusted manufacturing activity in July showed most regions in expansion. Both the Northern and Central regions showed almost identical levels of activity, 54.5 and 54.4 respectively, to lead the index. 

 

PMI figures for production, employment, new orders, finished stocks, and deliveries were up from last month. Production had the largest increase; an 8.1 point increase from 47.1 in June to 55.2 in July. However, employment (49.5) continued to decline.

 

The latest figures released from Statistics New Zealand indicate a decline in manufacturing employment. 

 

For the June 2007 quarter, the Household Labour Force Survey indicates that while the labour force participation rate is high, there has been a significant annual decrease in employment in the manufacturing industry. In June 2005, the manufacturing industry employed approximately 276,500 FTEs while in June 2007 this number dropped to 266,700.

 

The Quarterly Employment Survey for the June 2007 quarter illustrates that the number of FTEs increased 1.5% from the previous quarter. However, increased employment in education and construction was partly offset by reductions in manufacturing. 

 

Declining employment in manufacturing has also been highlighted by a recent survey by the Canterbury Manufacturer’s Association (CMA). This survey showed the long-term decline of manufacturing jobs compared to other sectors of the economy. 

 

The Business NZ Performance of Manufacturing Index (PMI) also points out that while employment in July 2007 was up 2.1 points from June, this reading remains below 50 indicating manufacturing employment is declining.

 

There were mixed results in the July Business NZ Performance of Manufacturing Index (PMI)for the various manufacturing industry sectors. The petroleum, coal, chemical, and associated product sector (57.5) displayed the strongest result for July, while food, beverage, and tobacco manufacturing experienced a small decline in activity (48.7). 

 

Strong results in petroleum, coal, chemical, and associated products can be attributed to the first two shipments of crude oil from Taranaki’s Tui oil field. This crude oil was produced on July 31 and two shipments of crude oil were loaded in early August. Strong growth in this sector is forecast to continue as some form of petroleum exploration activity is expected to occur in most geological basins in New Zealand throughout 2007 and 2008. 

 

 

Oil and gas developments, such as Tui and Maari crude oil and Pohokura and Kupe gas in the Taranaki region, are providing Jed Clampett and his kin with plenty of bubbling crude. Oil production is forecast to peak at about 28 million barrels by 2008, from about seven million barrels in 2005, and New Zealand’s self-sufficiency in oil is scheduled to climb to about 60%.

 

New Zealand’s first stand alone offshore oil development, the Tui project in Taranaki, is loading oil onto it’s floating production, storage and off take vessel at a rate of 42,000 barrels a day. The floating production, storage and off take vessel is designed to handle up to 50,000 barrels per day, and as experience operating the facility grows, the Tui is expected to quickly reach this peak. 

 

The primary markets for this crude oil is the Asia Pacific region, including the refineries on the East Coast of Australia. According to preliminary testing from the production wells, the properties and quality of Tui oil are in line with pre-production expectations. This means the light Tui oil has similar properties to oil produced from the Maui Field and crude produced in Bass Strait, Australia.

 

The Tui, Amokura, and Pateke oil pools are estimated to hold almost 28 million barrels of recoverable oil.   However, the reserves of the individual oil accumulations are insufficient for commercial development. Co-development of the three separate accumulations, taking advantage of their proximity to one another, is expected to yield a profitable development.

 

While the Taranaki offshore developments are dominating the picture of oil exploration and production, exploration is also occurring in other regions notably Northland, East Coast, Canterbury, and Southland. There could be up to 33 offshore wells drilled over the next three years, and three offshore rigs operating off the New Zealand coast, an unheard of feat.   

 

Onshore exploration, while not as buoyant as offshore, is also in a healthy state. The $30 million development of the onshore Taranaki Cheal oil field is nearing completion. Production from this field is expected to peak at 1,400 to 1,500 barrels per day. 

 

While exporters keep their eye on the exchange rate, if oil prices remain high black gold may help to maintain PMI figures. This could be good news for manufacturing, where the average value of the PMI over the last five years has been 54.5.