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Summary
- May manufacturing activity has shown improvement over April.
- Its PMI is 58.6, slightly higher over April’s 56.4.
- Manufacturing sector still faces challenges due to higher input costs and supply-chain disruptions.
Manufacturing activity in New Zealand maintained healthy levels of expansion in May also, according to a Survey.
The Bank of New Zealand-Business NZ's seasonally adjusted Performance of Manufacturing Index (PMI) edged up to 58.6 from 58.4 from the previous month’s levels. A reading above 50 on the Business NZ (PMI) indicates an expansion in activity, while anything below that threshold indicates a contraction.
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According to the Survey, manufacturing trend showed a very positive trend
Even though manufacturing is not a strong forte of New Zealand, it has shown a positive activity of late as 58.6 points on the PMI indicate a higher level since July 2020, when NZ came out of the lockdown. BusinessNZ's executive director for manufacturing Catherine Beard said that manufacturing sector was in an expansion mode due to two major sub-indices showing an increase -- Values of Production (65.3) and New Orders (63.7).
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Supply-chain Problems and higher input costs
Ms Beard said that globally manufacturing continued to expand. This is leading to increasing pressure on the input prices across most countries and the higher raw material costs. The supply-chain disruptions have been mainly caused by the coronavirus pandemic, which forced lockdowns and closures of borders. Things will change in due course but as of now, the manufacturers are feeling the heat as raw materials are not able to reach them on time. Even the employment is still at lower levels as enough manpower is not available for full-scale manufacturing activity.
Whatever expansionary trend is visible; it is because of the improving economic conditions and scaled up economic activity around the world.
Manufacturing still not strong in NZ
Manufacturing in NZ is still on the back foot. It contributes only 12% or of the gross domestic product. The sector employees are around more than 241,000 and manufactured goods contribute 52% of the total value.
Most of the manufacturing in NZ is for domestic use and export manufacturing is very less.
Manufacturing lagging behind in updated machinery
New Zealand’s manufacturing sector is lagging behind. It is not updated in its machinery. This sector needs to reduce its dependence on the manual work, which makes it incompetent as compared to international players.
It says that the NZ manufacturers must adapt to the latest techniques and the latest trends in machines if it has to succeed.
