NZ manufacturing activity accelerates in April

New Zealand's construction sector is a major driver for local manufacturing with demand for building materials a key contributor to overall production activity. Photo: Lynn Grieveson

New Zealand's manufacturing activity accelerated in April, bouncing back from a lull in the first three months of the year, as a pick up in building intentions stoked production among building materials companies.

The BusinessNZ-Bank of New Zealand performance of manufacturing index rose to a seasonally adjusted 58.9 in April from 53.1 in March and higher than the 56.4 reading a year earlier. A reading above 50 separates expanding activity from contraction. The pace of expansion had slowed in the two previous months.

"April's PMI strength follows another lurch higher in residential building consents after a period of consolidation at a high level," BNZ economist Doug Steel said in a note. "New dwelling consents surged nearly 15 percent higher on a seasonally adjusted basis in March, building on a 6 percent lift in February. It's a positive development for manufacturers."

New Zealand's construction sector is a major driver for local manufacturing with demand for building materials a key contributor to overall production activity.

The country's housing shortage and Canterbury rebuild have supported manufacturing over the past eight years, and today's PMI shows the pick-up in residential investment intentions underpinned sector readings of 57.5, 65, and 77.5 for metal products, wood and paper products, and non-metallic mineral products respectively.

BusinessNZ manufacturing executive director Catherine Beard said the acceleration in activity was supported by strong readings for production, new orders and deliveries of raw materials, with an increase in positive comments typically noting a lift in construction and improvement in overseas orders.

BNZ's Steel said the result suggests the economy "has not fallen off the rails" despite the downturn in business sentiment, and that new orders were a "positive future signal" pointing to "decent" second-quarter growth.

Still, weaker primary processing would remain a drag on growth, with meat processing weak after "a weather-induced early livestock kill in Q4", Steel said.

Among the sub-indices, PMI production rose 6.8 points to 59.5, employment gained 1.5 points to 54.9, new orders climbed 6 points to 60.3, finished stocks increased 0.9 points to 55.2 and deliveries jumped 6.7 points to 60.5.