The manufacturing sector remains in expansion mode, despite some aspects of the results that need to be watched closely in the months ahead, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

 The seasonally adjusted PMI for June was 53.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 0.7 points higher than May, with the sector now being in expansion for 21 consecutive months.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the slight lift in expansion levels was obviously welcome, albeit with a few head winds for manufacturers.

 “Overall production levels remain healthy, and have been very consistent for the last three months. Employment levels continue to show more people entering the sector, while the largest proportion of comments received are still positive.

“As mentioned last month, the fundamentals of both the PMI and other indicators of the economy still point to positive activity. However, the continued strength of the New Zealand dollar, as well as new order levels continuing to fall, mean there are elements of the sector that need to be watched closely in the months ahead.

BNZ senior economist, Craig Ebert says “Wading through the manufacturing component of the latest QSBO, while there are clear hints of moderation, it seems mainly a settling down into normal growth patterns rather than any sort of stalling. We get a similar impression for the recent PMI levels and trends, with its weak spot seemingly concentrated in new orders.”

 Four of the five seasonally adjusted main diffusion indices were in expansion during June. Production (55.9) again led the way for the current month with a value 0.8 points higher than May. In contrast, new orders (50.9) continued to fall, dipping another 0.4 points and at its lowest level since December 2012. Employment (52.9) also dipped, dropping 0.6 points from May, while finished stocks (49.7) fell 2.6 points to record a minor decline for the current month. Deliveries (55.1) rose 3.6 points to record its highest result since March.

Three of the four regions were again in expansion during June. In the North Island, the Northern region (50.6) decreased 6.8 points, but remained in slight expansion. The Central region (52.8) also fell, but showed moderate expansion levels for June. In the South Island, the Canterbury/Westland region (56.6) was all but unchanged from its May result, while the Otago-Southland region (48.8) improved slightly from the previous month, although remaining in contraction.