New Zealand’s manufacturing industry continued to expand in December 2017, although a slower rate after it reached a reading of 51.2 on the BusinessNZ-Bank of New Zealand’s (BNZ) performance of manufacturing index.
While the reading represented a 6.5-point drop from 57.7 in November, it still maintained a growth streak that began in October 2012. A score above 50 indicates growth, while a number below than that suggests a contraction.
Uncertainty after the recent elections mainly caused the decline, according to BNZ head of research Stephen Toplis. Many companies decided to postpone investment until they can be sure of any changes in industry regulations.
Some of these policies cover rules for industrial relations, employment and trade issues. As a result, each of the five sub-indices fell in December, but they remained within a reading of 50. Deliveries fell the most at 8.8 points to 50, followed by production and new orders that dropped 8.4 points to 53.3 and 7.1 points to 50.2, respectively. Employment also dropped 2.8 points to 51.3 and finished stocks fell 4.8 points to 51.9.
Even with the political uncertainty, Toplis expects manufacturing to pick up in the future. Ancillary services like garnet sandblasting and production machinery will remain in-demand. Even if some companies hold a dim outlook on economic growth, nobody can know for sure if the industry will continue its sluggish growth.
Not all businesses, however, expect activity to continue its downward movement into this year. According to New Zealand Institute of Economic Research’s survey, only a net 16% expect economic conditions to worsen in the first six months.
Manufacturing activity still plays an important role in the economy. Despite a slower pace of expansion in December, it remains to be seen whether or not that momentum will carry on in the near future.