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Catherine BeardExecutive DirectorManufacturingNZ
17 January 2020
“The manufacturing sector averaged 50.9 over 2019, compared with 53.8 for 2018 and 56.2 for 2017. While the first half of the year managed to just keep its head above water, the second half saw four of the six months in contraction. “Looking at the sub-index values for 2019, the key results for production and new orders averaged 50.1 and 51.7 respectively. Employment struggled to gain traction, averaging 49.4 over 2019. At this stage there is not much evidence to suggest the first half of 2020 will see a noticeable improvement. BNZ Senior Economist, Craig Ebert said that “the December result was disappointing. After a couple of months flirting with positivity, the PMI dipped back just below the breakeven line again”.
New Zealand’s manufacturing sector fell back into contraction for the last month of 2019, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for December was 49.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was a second consecutive decrease in activity, and the lowest result since September.
BusinessNZ’s executive director for manufacturing Catherine Beard said that the contraction experienced in December was symptomatic of how 2019 played out for the sector.
No Xmas cheer
BNZ - BUSINESSNZPERFORMANCE OFMANUFACTURINGINDEX
49.3 -1.9 contractingDecember Value Monthly Change Slower rate
QSBO expectationsHaving said this, the QSBO also pointed to the manufacturing sector probably being through its worst now. Respondents expected output over the coming 3 months to pick up noticeably, for example.Read more →
CapacityFor the meantime, capacity utilisation in New Zealand’s manufacturing industry has come off the boil, to an extent. The QSBO variable on this – known as CUBO – eased to 91.0% in the December quarter, from 92.5% in the September quarter, and 92.7% back in June.Read more →
The PMI It’s disappointing. After a couple of months flirting with positivity, New Zealand’s Performance of Manufacturing Index (PMI) dipped back just below the breakeven line again in December.Read more →
QSBO reports A sense of struggle could also be extracted from the manufacturing section of Tuesday’s NZIER Quarterly Survey of Business Opinion (QSBO).Read more →
Manufacturing Snapshot
View full BNZ Manufacturing Snapshot
Craig EbertSenior Economist
Main Indices Regional Results
Production
Employment49.9
Deliveries50.7
New Orders51.0Finished Stocks
52.8
51.3
46.5
48.1
56.9
48.2
July 2014 - December 2019
BNZ - BusinessNZ PMI Time Series
National Indices Dec2018
Aug2019
Sep2019
Oct2019
Nov2019
Dec2019
BNZ - BusinessNZ PMI
Production
Employment
New Orders
Finished Stocks
Deliveries
View PMI Time Series Data
Results are seasonally adjusted
PMI Time Series Table
50.752.651.347.448.559.6
52.849.248.749.152.557.6
51.054.056.051.044.956.5
49.949.150.050.050.252.0
48.249.452.446.549.655.0
49.351.252.648.848.655.0
Level 6, JacksonStone House, 3-11 Hunter Street, Wellington 6140+64 4 496 6444 | admin@businessnz.org.nz
ssummers@businessnz.org.nz
Stephen Summers:
Technical Comment
04 474 6799
Craig Ebert:
04 496 6560
Catherine Beard:
For media comment, contact:
Media CommentSponsor StatementBNZ is delighted to be associated with the Performance of Manufacturing Index (PMI) and BusinessNZ.
The association brings togetherthe significant experience of leading business advocacy bodyBusinessNZ, and business financespecialist BNZ.
We look forward to continuing ourassociation with BusinessNZ and associated regional organisations, and to playing our part in theongoing development of the NewZealand manufacturing sector.
50.1 2 January 2019
J.P. Morgan Global Manufacturing PMITM
International Results
USA
Australia
Eurozone
UK
China
Japan
NZ46.3
52.447.5
51.5
48.3
49.3
48.4
04 496 6564
17 January 2020
bnz.co.nz/research
Page 1
Manufacturing Snapshot RESEARCH
The PMI
It’s disappointing. After a couple of months flirting with positivity, New Zealand’s Performance of Manufacturing Index (PMI) dipped back just below the breakeven line again in December. As such, its index reading of 49.3, from 51.2 in November, was even further adrift of its long-term average of 53.3. Production remained the biggest laggard, with its index slipping to 48.2, from 49.4. New orders, meanwhile, moderated to 51.0 – clearly below its statistical norm (55.0). The PMI employment indicator, at 49.9, was only fractionally below trend, while the bounce in inventory (52.8, for 49.2) was nothing outlandish, in broad respect.
QSBO Reports
A sense of struggle could also be extracted from the manufacturing section of Tuesday’s NZIER Quarterly Survey of Business Opinion (QSBO). For example, reports of output regarding the past 3 months were roughly flat, albeit not negative as they were for the prior quarter. Similarly, respondents’ reported new orders as being down slightly, although nowhere near as weak as they were 3 months before that. Interestingly, there was also a clear rise in overdue debtors assailing the manufacturing sector, according to the QSBO.
QSBO Expectations
Having said this, the QSBO also pointed to the manufacturing sector probably being through its worst now. Respondents expected output over the coming 3 months to pick up noticeably, for example. The forward view was likewise stronger than it was last quarter, with respect to orders, investment in plant, machinery and buildings, export sales and, at the margin, employment. There was also a sense of a turning point, in that profit indicators were looking much less dire, as cost indicators, while still strong, were not as intensive as they were over the earlier part of last year. And while there was an increase in inventory reported amongst QSBO manufacturers, they didn’t view it as anything “too high”.
Capacity
For the meantime, capacity utilisation in New Zealand’s
manufacturing industry has come off the boil, to an extent. The
QSBO variable on this – known as CUBO – eased to 91.0% in the December quarter, from 92.5% in the September quarter,
and 92.7% back in June. However, with its long-term average
being 90.0%, the latest result is still above normal. It’s been a
similar story on staffing difficulties for manufacturers, to a point. While the QSBO gauges on these aren’t as severe as
they were at the start of 2019, they were still relatively
significant by the end of it. Like for the economy as a whole,
these series suggest a still-tight labour market, inferring a relatively low unemployment rate.
As You Were
Pay Attention
But A Turning Point?
Just a Little Less Tight
craig_ebert@bnz.co.nz
Manufacturing Snapshot 17 January 2020
bnz.co.nz/research
Page 2
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