RTTNews - New Zealand's manufacturing activity rose to its highest level in more than a year in July, the latest report from the Business New Zealand showed Thursday.

The seasonally adjusted BNZ Capital-Business NZ Performance of Manufacturing Index climbed to 49.7 in July from 46.5 in the preceding month, and marked the highest reading since April 2008, when it stood at 50.9.

A reading above 50 indicates that manufacturing is generally expanding, while a reading below 50 signals that it is declining.

Comparing New Zealand's manufacturing activity with the rest of the world, the JPMorgan Global PMI for July stood at 50, the highest in 18 months.

The Business NZ's chief executive Phil O'Reilly said the positive results for key sub-indicators provide a much stronger base for further improvement in the manufacturing sector.

The production index showed expansion for the time since April last year, rising to 51 from 48.1 in June, but was less than the reading of 52.2 seen in April 2008. New orders also improved further to 55.1 from 51.9, reflecting the highest level since December 2007.

Commenting on the improved performance of production and new orders, O'Reilly said, The values for both these indices in July means that New Zealand is agonizingly close to breaking 15 months of contraction in a sector that is often the first to fall into recession, but often the first to come out of it.

Within the sectors, the petroleum, coal and chemical and associated industries showed expansion for the first time since February last year, while the metal sector showed the highest level since August last year. The food, beverages and tobacco sector remained at same levels as in June, but was in expansion for the third consecutive month.

O'Reilly said for a sustained expansion in manufacturing, improvements need to come from the numbers employed in the sector, which was still some way off from recovery. The employment index index climbed to 44 from 40.3, but remained in contraction.

Further, deliveries of raw materials improved in July, with the index rising to 47.6 from 43.1 in June. However, the finished goods index dropped further by 1.2 points to 42.6, to reach the third consecutive new low since the survey began.

Elsewhere, the Statistics New Zealand said in a report on Thursday that food prices climbed 0.6% in July, slower than a 2.8% rise in the preceding month, reflecting an increase in vegetable prices. Year-on-year, food prices climbed 8.4% in July, at the same pace as in June.

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