An Economic Update on NZ Manufacturing
At Fero we are passionate about making the the manufacturing sector in NZ great, so it’s fantastic to see how important this industry is and the contribution it provides to the national economy. In the year ended September 2014, the manufacturing sector output accounted for 11% of real GDP and the proportion of the labour force employed in manufacturing was around 12%. These figures are increasing throughout 2015 with employment up by 10% compared to this time last year.
According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI), the outlook is still remaining positive for the continued expansion of this sector for July.
BNZ reported that the seasonally adjusted PMI for July was 53.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was 1.6 points lower than June, it was still the second highest result for the last four months. The sector has now been in expansion for 34 consecutive months. The rate of progress has slowed a bit from last year, with the PMI averaging 53.5 in 2015 to date compared to the 56.0 average through 2014. But growth seems to be solidifying. July’s PMI result exactly matches the average in the first half of the year.
There are other influences that effect the industry, and for some manufacturers the recent fall in the NZ dollar has been seen as a positive, whilst the negative influences were mainly from the dairy sector. The recent crash on the Chinese stock market is definitely a concern for all of NZ and analysts are warning that we may see a slower rate of growth in NZ manufacturing due to the impact on consumer confidence and potential consumption. That said, China is still a massive consumer and I don’t see them going away.
Despite some of these negative influences the manufacturing industry is still very positive, and the fact the official figures show employment growth coming primarily from the manufacturing sector indicates that we are certainly holding our own. Buoyant production and the balance of new orders to inventory are encouraging signs for further expansion.
It should be an interesting second half of the year!