12 Nov 2021

Manufacturing sector continuing to expand, new data shows

2:07 pm on 12 November 2021

Manufacturing activity is continuing to rebound as Covid-19 restrictions ease.

Q-West Boat Builders welding fabricator Grant Loveridge works on a new ferry for the Auckland market.

The northern region recorded a sharp rebound after a prolonged period of weakness due to the ongoing restrictions. Photo: RNZ / Robin Martin

The BNZ-Business New Zealand Performance Manufacturing Index (PMI) for October is up 2.7 points on the previous month, to sit at 54.3.

The headline index fell to 39.7 in August, as the country went back into lockdown.

A reading above 50 indicates the sector is expanding, while anything below 50 indicates contraction.

"Even though October's reading is above average, we'd classify it more in the realm of some recovery from a large hit rather than an indication of outright strength," BNZ senior economist Doug Steel said.

Most of the sub categories measured in the index were in expansion territory, including production, finished stocks, deliveries and new orders.

He said the rising production index offers a sense that manufacturing output had turned a corner, which would be a plus for gross domestic product calculations for the December quarter.

Other components of the PMI raised more questions than answers, Steel said, with deliveries of raw materials and stocks of finished products surging.

"This may reflect some easing in supply bottlenecks, at least from level 4 extremes, in which case it would be very welcomed.

"In any case, it is good to see improvement with some partial relaxation of restrictions, albeit with many restraints remaining through October."

The employment indicator was the only category to ease over the month, falling from 54.2 to 52.1.

Steel said this did not dissuade him from the view that overall employment in the country would edge higher in the fourth quarter, as the sub-index remains above its long-term average.

The northern region, which includes Auckland, recorded a sharp rebound after a prolonged period of weakness due to the ongoing restrictions.

Steel said this did not necessarily portrary a strong level of activity, rather it was an indication of the regions recovery from being at stricter Covid restrictions for longer.

Manufacturing activity in the rest of the country also rose over the month.

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