Despite a slight improvement from the previous month, New Zealand’s manufacturing sector remained stubbornly in contraction during September, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for September was 48.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). While this was 0.8 points up from August, it represented the fourth consecutive month of no expansion in the sector. Over the last quarter, the PMI has averaged 48.3.

BusinessNZ’s executive director for manufacturing Catherine Beard said that although the September result did not sink further than August, details behind the main result need to be outlined.

“Although the employment sub index bounced back from August, the continued drop in new orders to its lowest point in more than three years may have an adverse effect on production numbers in the months ahead. When examining the comments put forward by manufacturers, the low number for new orders does not come as a great surprise given terms such as ‘lack of demand/orders’ and ‘slowness in orders’ were prevalent.”

BNZ senior economist Craig Ebert said the September PMI is more likely to be temporary turbulence than tragedy.

“While the data are worryingly weak-looking, they are about current conditions more than the way ahead. Talk that the industry is in crisis is overblown. Manufacturers’ expectations for output over the next three months remain positive.”

Four of the five seasonally adjusted main diffusion indices were in contraction in September. While finished stocks (50.6) bucked the trend with its first level of expansion since May 2012, new orders (45.9) fell a further 2.0 points from August and experienced its lowest value since May 2009. The remaining indices improved somewhat on August. Employment (49.2) increased 3.7 points, while both production (49.9) and deliveries (48.8) also edged upwards to the no change mark of 50.0.

Given the continuation of lacklustre results, unadjusted results by region were fairly similar to the previous month. The Central region (53.1) led the way for a third consecutive month, increasing 0.4 points from August. Both the Northern (47.1) and Canterbury/Westland (49.2) regions improved from August, although the Otago-Southland region (49.8) slipped back under 50.0.

– (How is your company finding current conditions for manufacturing. Email me Doug Green, managing editor, NZ Manufacturer words@xtra.co.nz).