24 Jan 2014

Manufacturing continues to expand

7:31 am on 24 January 2014

The manufacturing sector expanded for a 15th consecutive month in December.

The latest BNZ-Business New Zealand performance of manufacturing index dipped slightly to 56.4 points in December from 56.7 in November, but the reading above 50 indicates expansion. The index averaged 56 points through 2013.

The survey indicates the manufacturing sector is benefiting from the improving economy, led by rebuilding efforts in Christchurch and dairy farm construction work.

That's expected to result in more jobs, with the survey's employment indicator hitting its highest level in more than six years.

However exporters are gloomy about their biggest market, Australia, where they face subdued demand and a sharply rising dollar, making them less competitive.

While more than two-thirds of respondents are upbeat, expected interest rates increases could also curb demand, and raise costs.

Data suggests economy 'growing quite strongly'

BNZ economist Doug Steel says the momentum though the second half of 2013 does not appear to be a fluke. "The details reinforce that the sector is growing and likely to continue growing for the forseeable future."

Mr Steel says it's another positive indicator for the economy and the manufacturing sector in particular and it suggests the economy is growing quite strongly.

He says that will filter through to employment and the unemployment rate is expected to fall below 6 percent in the fourth quarter.

But Mr Steel says there are still some negative comments from respondents, although they are far outweighed by the positive ones.

He says the main negative comment has been about New Zealand's currency and its sharp move against the Australian dollar as well as negative comments from respondents that the Australian economy itself is slowing down.

Separately, ANZ Bank's survey of job advertisements fell for the second successive month in December, though the bank says the trend indicates a modest decline in unemployment over the next two quarters.