16 Oct 2014

Manufacturing, jobs underpin economy

4:33 pm on 16 October 2014

Stronger manufacturing activity and rising demand for workers are continuing to underpin the economy.

Confidence in the jobs market has risen to its highest level since September 2008.

Confidence in the jobs market has risen to its highest level since September 2008. Photo: PHOTO NZ

However, analysts say New Zealand's economic growth is past its peak and are warning dairy farmers they should prepare themselves for more cuts in income.

That was despite prices edging up in the international GlobalDairyTrade auction overnight, and the fact the economy is still expanding at a reasonable clip.

Manufacturing activity expanded to its second-highest level in 2014 in September, with BNZ-Business New Zealand's Performance of Manufacturing Index rising one point to 58 in September compared with the previous month.

Manufacturing New Zealand executive director Catherine Beard said activity had picked up again after a quieter period in the middle of the year.

"A lot of it is flowing through from a really strong building and construction sector. But also when you look at the subgroups, food and beverage and tobacco manufacturing was very high as well," she said.

Job ads up

Job advertisements also picked up last month, with the ANZ Bank's monthly survey finding seasonally adjusted job ads rose 2.4 percent to 36,931 in September compared with the previous month.

Internet job ads rose, more than offsetting fewer ads in newspapers, with ads rising in Auckland and Wellington but falling in Canterbury.

ANZ senior economist Sharon Zollner said it indicated unemployment, which currently stands at 5.6 percent, will edge under 5.5 percent by the end of the year.

Dairy farmers also received better news, with auction prices slightly up overnight.

The average price in the twice-monthly auction increased 1.4 percent to $US2640 a tonne.

Wholemilk powder rose 3.1 percent to $US2503 a tonne, while skim milk powder fell 3.6 percent to $US2462 a tonne.

AgriHQ dairy analyst Susan Kilby said it was too early to say whether prices, which had halved since peaking in February, had bottomed out.

"The world is still awash with milk and there is still a lot of uncertainty ... it's still a positive result but we need to see more of these positive results before that's really going to help our farmers out," she said.

Analysts continued to cut back dairy payouts, with AgriHQ Kilby now picking $4.75 a kilogram of milk solids, compared with Fonterra's current $5.30 forecast.

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