Slowing growth raises questions for New Zealand manufacturing

Growth in New Zealand's manufacturing sector dropped to its lowest in two years last month, according to the latest performance of manufacturing index (PMI) out Friday.

The BNZ-Business New Zealand PMI for January was 51.6, on a scale where above 50 indicates expansion and below 50 contraction.

The level was 2.6 points lower than December 2016 and was the lowest level of expansion since January 2015.

Business New Zealand executive director for manufacturing Catherine Beard said while the decrease in expansion was not ideal, it was clear from comments in the survey that a number of factors played a part.

The negative comments had noted the Christmas and festive season holiday break had played a sizeable role in reduced activity, Beard said in a statement.

"On the flip side, those who outlined positive comments often did not note anything specific, but more business as usual," she said.

BNZ senior economist Craig Ebert said in the statement that the slowdown was mainly because of a marked slowdown in its production index, "which dampens expectations of a big bounce in the PMI over the short term."

A BNZ analysis showed the New Zealand PMI had averaged 55.3 over the last three years, while the global PMI had averaged 51.4 over the same period.

"Yet, over the last six months or so there has been something of a reversal of fortunes," said the document.

While the New Zealand PMI had slowed a lot, to a modest pace, the global PMI had been picking up, to a decent speed.

"January's global PMI, of 52.7, with December's, was the strongest since February 2014. Might the global demand cycle be offering hope to local manufactures, just as some of the local influences peak in force?" it asked. Endit