As manufacturers we often want to get a feel for what the health of our sector is looking like. Fortunately there are a number of organisations that do this that are worth looking at. One of the common measures is called a PMI – Performance of Manufacturing Index (not to be confused with the Purchasing Managers Index which also uses the abbreviation PMI). Also, confusingly, Australia and NZ use different scales.
In New Zealand, Business NZ with BNZ Bank publish a PMI. When the PMI is above 50 the manufacturing sector is expanding and when it is below 50 it is contracting. What is normally most useful is to see how it is changing from month to month. In June the PMI was 59.7 (up 8.4 from May) which is the highest it has been since July 2021. This confirms what we are hearing around the traps in NZ – that there is generally a more positive outlook, companies are hiring, manufacturing as a whole is growing, although some are still finding it tough. New orders were particularly strong which is a favourable indicator that manufacturing should see rosier times as the year progresses.
You can read the report summary here.
In Australia, Australian Industry Group used to publish a similar PMI index, but about 3 years ago replaced this with an Australian Industry Index (Aii), which combines data from manufacturing, construction, engineering, technology and business services. This index is not quite so good for just getting a handle on manufacturing, but fortunately they still publish the manufacturing one although with not as much commentary. When the Australian PMI is above zero, the manufacturing sector is expanding and when it is below zero, it is contracting. In June, the PMI was minus 16.8 which is up 4.5 from May – this means that the rate that the sector is contracting at is slowing and heading back toward positive territory.
You can read the report summary here.
We think these indexes are useful to help understand what is happening in the wider manufacturing sector – but they can’t replace local knowledge of what is happening in your specific region and your specific sub-sector of manufacturing.
The Best Practice Network Regional Directors are regularly out and about talking to lots of companies so don’t hesitate to contact one of them if you want to have a chat about what is happening in your area.