New Zealand’s total manufacturing sales volumes fall in Q3 2019, core manufacturing activity likely to pick up in Q4

New Zealand’s total manufacturing sales volumes dropped 0.3 percent quarter-on-quarter in the third quarter, after a 2.7 percent drop in the second quarter. Out of the 13 manufacturing industries, seven saw a contraction from last quarter.

Meat & dairy product manufacturing dropped 4.5 percent, lead the fall in volumes, as strength from delayed slaughter earlier in the year unwound further, and in line with expectations of a slightly weaker production this season. In nominal terms, meat and dairy sales rose 2 percent as higher prices provided an offset.

Looking through the volatile meat and dairy component, “core” manufacturing volumes rose 0.8 percent, implying underlying momentum, while not solid, is holding up. Trend growth in core manufacturing rose from the second quarter, implying the slowdown in underlying momentum has found a floor. In nominal terms, core manufacturing rose 1.1 percent, implying that prices lifted in the quarter.

“Looking forward, the October rebound in the BNZ-BusinessNZ PMI (back into expansionary territory) tentatively suggests core manufacturing activity will pick up in Q4”, said ANZ in a research report.

The slowdown in economic momentum is close to bottoming out, and that growth is expected to gradually accelerate from the second half of 2020. Core manufacturing is likely to follow. The outlook for meat and dairy depends greatly on the weather.

“Our expectation for a return to more normal (less favourable) weather conditions this season should see annual growth in both meat and dairy volumes moderate over the year ahead. Taken with other partial indicators, today’s print is consistent with our Q3 GDP pick of 0.4 percent q/q”, added ANZ.