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Manufacturing sales volumes in New Zealand rose during the second quarter, following upswing in dairy and meat product manufacturing of late. Core manufacturing activity continues to expand at a reasonable pace, despite the clear headwinds of NZD strength and a wobbly global scene.
Total manufacturing sales volumes rose 2.8 percent q/q in Q2, more than reversing the 0.7 percent q/q drop in Q1. The movement in headline sales has been thrown around by swings in meat and dairy product manufacturing of late, with sales in this sector surging 8.6 percent q/q in Q2, after dropping 6.7 percent q/q in Q1.
"We suspect a lot of this volatility relates to timing issues around livestock slaughtering, with stock sent to slaughter earlier than normal late last year on El Nino fears," ANZ commented in its latest research note.
Stripping out the meat and dairy impact, core sales volumes rose a more modest 1.4 percent q/q. It is this component that has more relevance for us in terms of estimating the upcoming GDP figures due to be released on Sep 15. Leading the lift were gains in sectors exposed to construction, non-metallic mineral product manufacturing rose 9.0 percent q/q, and wood and paper product manufacturing rose 2.9 percent q/q.
Moreover, New Zealand’s manufacturing sector continues to outperform global peers. While weak demand and over-capacity issues are plaguing manufacturing globally, strong construction is a key factor seeing reasonable growth numbers locally, looking through the usual swings in agricultural production.
Meanwhile, even the elevated NZD is failing to dent performance meaningfully and while the latest PMI data has eased a touch, it is still pointing to a reasonable pace of expansion in Q3 as well, the report noted.
