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Women working in manufacturing and production - Source: ONE News -
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The manufacturing sector has expanded for the first time since April 2008, according to the latest Performance of Manufacturing Index (PMI).
The BNZ Capital - Business NZ PMI shows that manufacturing activity for September rose 2.9 points from August to 51.7.
A figure above 50.0 indicates the sector is expanding and below that contracting.
Business NZ chief executive Phil O'Reilly is cautiously optimistic on the data.
"One positive result should not mean we anticipate strong upward growth. However, there are definitely enough positive signs to give some indication that activity may at least remain somewhere in expansionary mode leading through to Christmas," he says.
The survey showed new orders were strong, recording the highest result since November 2007. Production and deliveries of raw materials also improved, and employment in the sector showed its first signs of growth since January last year.
Finished stocks was the only group in the index to decline and remained in contraction.
O'Reilly says the black cloud on the horizon for manufacturers is the strengthening kiwi dollar which has been hovering between 73 and 74 US cents recently.
"How far the New Zealand dollar keeps pushing upwards and how many international orders suffer as a consequence will determine the extent future expansion is inhibited," he says.
However, BNZ Capital economist Mark Walton says it is important to remember that not all exporters are paid in US dollars.
"Australia, is still growing as our biggest export market, and is leading the pack of developed countries out of the recession."
"With the NZD appreciating strongly and NZD/AUD remaining fairly stable, manufacturing prospects are looking increasingly bright," he says.
Walton says dairy farmers and processors are also benefiting from higher commodity prices which offset the currency impact.
In the global context, New Zealand's PMI is slightly behind Australia which recorded a September PMI of 52.0, and the US on 52.6.
New Zealand sits 1.3 points behind the JPMorgan Global PMI of
53.0.
