After several months of easing in manufacturing growth, Business New Zealand’s Performance Manufacturing Index (PMI) for March 2008 dropped 3.5 points from February to sit at 48.3.  Remember that a number below 50 indicates negative growth.  This drop means the March 2008 PMI is the lowest March value recorded since the survey began in August 2002; the first time the PMI has shown a decrease in overall activity since January 2006; and the lowest PMI value since November 2005.

These numbers reinforce official Statistics New Zealand manufacturing sales volume numbers for the 2007 year, which show a lengthy period of subdued (at best) growth.

For the first time since December 2005, the majority of indices recorded a decline rather than expansion.  And unadjusted activity for March showed activity was down in all but one of the regions.  Canterbury/Westland continued to show expansion, but at a slower rate of 52.4, the Northern (47.8) and Central regions their recorded third and fourth month of consecutive declines, and the Otago/Southland region (46.3) had its lowest result since January 2007. 

Unadjusted results for the various manufacturing industries were also generally in decline during March.  The wood and paper product sector (38.8) displayed the strongest level of decline, followed by the textile, clothing, footwear and leather sector (43.0).

Examining the wood and paper product sector in more detail it can be seen that competition is tough and looks set to remain that way.  The paper product sector is competing with imports from China and struggling with the exchange rate.  Last month Croxley Stationery Limited announced it will consolidate its Auckland manufacturing plants to remain competitive.  This consolidation involves closing their Papakura factory and moving these operations to Avondale later in 2008.  Norske Skog is also looking to decrease production and job numbers globally, in an attempt to decrease debt.  For now no job losses are planned at their Kawerau plant but this plan may change in the future.  The Norske Skog plant in Kawerau employs more than 200 people.

And this month Carter Holt Harvey announced they may close their Thames sawmill with the loss of 145 jobs.  The timber industry is feeling the pressure of a downturn in the building industry and rising energy costs.  A downturn in the US and Australian building industries is impacting on the demand for our timber, and less people adding a deck, extension or building a fence is also decreasing sales at the timber merchants.  Some commentators in the industry believe more small to medium-sized sawmills such as the Kopu sawmill will close in the future as the industry consolidates and sawmills increasingly require the technology, machinery and skilled staff to grade timber to meet customer requirements. 

The textile, clothing, footwear and leather sector was hit this month with the loss of 165 jobs at Feltex Carpets.  The company has six manufacturing sites and has consolidated its operations.  Feltex closed its Fielding plant this month with the loss of 80 jobs, while their Foxton plant will close in August.  Many people at the Fielding plant had alternative employment options with the close proximity of Fielding to Palmerston North and the regional economy being fairly buoyant.  Those in Foxton may not fair as well, as Feltex is one of the biggest employers in the town and there are longer distances to travel to alternative employment.

These closures highlight how manufacturing activity is faring in the regions and why the PMI is painting a picture of overall decline in the manufacturing sector.