NZ's manufacturing still in the red, bigger slump could yet transpire, BNZ says
14th May 09, 12:20pm
New Zealand's manufacturing sector remained in contraction in April and had been in contraction for a year, the latest BNZ-Business NZ Performance of Manufacturing Index (PMI) showed. BNZ economist Craig Ebert said while there were some "encouraging trends" in April's figures such as employment, a bigger slump in the sector could yet transpire. The seasonally adjusted April PMI was 43.7, up from 41.9 in March, but still seven index points below the previous April low. A PMI below 50 represents contraction in the sector, while a score above 50 represents expansion. Unadjusted, the PMI fell in April to 40.5 from 41.8 in March. Ebert warned about interpreting the 'less negative' PMI results, both in New Zealand and other parts of the world such as China, as signs that the global de-leveraging process was over. JP Morgan's global PMI rose to 41.8 in April, from 37.3 in March. "(W)e need to be careful about extending the trend in the PMI's, when the economic and financial backdrop remains as problematic as it is," Ebert said. "To presume the gargantuan global de-leveraging process, which all and sundry have been rightly acknowledging over recent quarters, is suddenly all over and done with seems premature to say the least," he said. "Indeed, if all we're seeing in the recent PMI rebounds is simply a bit of catch-up or relief production, a bigger slump could yet transpire. Nothing can be ruled out at this early stage "“ negative or positive. The veracity, 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." "In this vein, we note yesterday's Chinese industrial production figures for April fell short of expectations. Instead of advancing 8.6% y/y, they increased 7.3%. This was not only slower than the 8.3% y/y result of March, but is less than half the pace China has become accustomed to over recent years. It's way below trend, in other words." In New Zealand, the two North Island regions, Northern and Central, experienced worse contractions in April than in March. The Northern region's PMI fell from 41.3 to 38.9, and Central's fell from 45.2 to 40.4 over the month. The two South Island regions experienced less negative results, with Canterbury moving from 41.0 to 44.7, and Otago moving from 37.6 to 40.4.