The BNZ-BusinessNZ performance of manufacturing index fell to a seasonally adjusted 56 last month from 58 in January, snapping two months of growth acceleration. New Zealand's manufacturing sector has been expanding since October 2012, where a reading of 50 separates expansion from contraction.
"Sure, it slowed a couple of points, but it remains firmly in the mid-50s zone implying a solid rate of expansion," BNZ senior economist Doug Steel said. "It is well above average – as it has been for many months now."
The latest monthly reading showed a decline across three of the five sub-sectors of the index, with the measure of employment falling to 48.5, from January's 54.7. The sub-index has not fallen below 50 since December 2014, and has not seen a reading that low since September 2013.
"While (employment) might just be monthly noise we should not dismiss it out of hand," Steel said. "We would be more concerned by the dip in the employment indicator this month if it were not for very strong new orders and ongoing underlying strength in broader spending indicators. Overall, the PMI remains robust."
Production dipped to 56.6 from 60.3 in January, while deliveries dropped to 56.8 from 58.1.
Steel said extreme weakness in the dairy sector was continuing to drag on manufacturing, with respondents noting the influence of the downturn on activity. However, spending indicators such as eftpos transactions remain buoyant, and increasing tourism and net immigration along with low interest rates are helping to underpin demand, he said.
The PMI showed the measure of new orders gained one point to 61, while finished stocks rose to 57.1 from 54.5 in January.
