Not a manufacturing crisis

New Zealand manufacturing expanded at the fastest pace in eight months in January, but employment in the sector is shrinking.

The BNZ-Business New Zealand Performance of Manufacturing Index climbed 4.8 points to 55.2 last month, the highest since May last year and the highest for the month of January since 2007.

The survey showed the strongest sector within manufacturing was in non-metallic mineral products, which stood at 77.5 and probably reflected demand for concrete, especially for the Christchurch rebuild, said Bank of New Zealand economist Doug Steel.

“Over the coming years we anticipate the positive flow-on effects of a stronger construction sector, and not only in Canterbury, to broaden to other parts of the manufacturing sector,” Steel said.

Production was the strongest of the five seasonally adjusted diffusion indexes within the PMI, with a reading of 57.7 last month, the survey shows. On the PMI scale, a reading of 50 separates contraction from expansion.

Deliveries were at 57.6 and finished stocks on 56.1, the highest since October 2007. New orders rose to an eight-month high of 55.8.

By contrast employment slipped to 48.4, marking the eighth straight month of contraction.

Manufacturing is expanding but jobs in the sector are declining.

That shows that, contrary to claims by  Opposition parties which are wasting money on an inquiry into the manufacturing “crisis” that there is no crisis in manufacturing.

The problem is in employment.

If manufacturing is growing while jobs are declining it suggests growth in productivity which is good but it is often based on improved technology and more mechanisation.

The down-side of that is fewer people are required for the work.

The solution isn’t to subsidise manufacturing it’s to help train people for different jobs.

The rise in the New Zealand PMI contrasts with that in Australia, which sat at just 40.2 in January, for the widest gap between the two nations since the New Zealand index was started in 2002.

This might seem like good news for those focussed on Trans-Tasman rivalry.

But Australia is our biggest trading partner and any indication its economy is faltering is a concern for us.

 

 

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