RTTNews - Manufacturing activity in New Zealand contracted for the twelfth consecutive month in April, but it showed an improvement for the second straight month, an official survey showed Thursday.
The report released by Business New Zealand, BNZ, revealed that the Performance of Manufacturing Index or PMI stood at 43.7 in April, up from 41.9 March. The reading was 7.0 points below its level in April last year, but was still at its highest level since September 2008.
A reading above 50 indicates an expansion, while a reading below 50 signals a contraction in activity.
Phil O'Reilly, Chief Executive of the BNZ noted that although the sector remained in contraction for a year, recent results have shown some cause for more positive views in the year ahead. The latest JP Morgan Global PMI bounced back to post its biggest monthly gain in the series history.
Further, other indicators in New Zealand and abroad were indicating a slowdown in the worsening conditions, or some positive outcomes. While O'Reilly said the country's manufacturing sector was a long way from showing expansion, further improvement in new orders and production could help it move back into expansionary levels.
Meanwhile, the BNZ's Capital Senior Economist Craig Ebert also seems to concur with the view and stated that April's results showed some encouraging trends. Every improvement has to start somewhere, even if in small steps. And in New Zealand's case the PMI recovery would seem to be in good company - with the large majority of global manufacturing indices also seeing a lift over the last couple of months, Ebert said.
At the same time, the economist pointed out that if the recent rebound in the manufacturing index was just a bit of catch-up of relief production, a bigger slump could yet emerge. The voracity, strength and sustainability of any recovery will ultimately depend on what's really going on under the surface, not on a line on a chart, Ebert added.
In April, most of the sub indicators improved from the previous month. The production index increased to 42.7 from 39.7 in March, and remained above the reading of 40 for the first time since December 2008. The employment index moved up to 44.8 from 39, while the new orders index rose to 42.8 from 41. The deliveries index also increased, to 43.6 from 41.2 in March. Finished stocks was the only indicator to show a decrease, with the index falling to 46.3 from 47.6 in March, to reach its lowest level since the beginning of the survey.
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