BNZ-Business NZ Performance of Manufacturing index falls for seventh consecutive month

New Zealand’s manufacturing sector has contracted further, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

It covers the month of September and shows manufacturing activity at the lowest seasonally adjusted, non-COVID affected monthly level since May 2009.

BusinessNZ’s Director of Advocacy, Catherine Beard, says the September result continued an entrenched downward trend in activity. 

“The manufacturing sector has now been in contraction for seven consecutive months, with little sign it is showing any improvement." she says.

This decline happened across several categories: production, new orders, employment and deliveries.

The report finds manufacturers continuing to note declining sales, with election uncertainty and rising costs proving extra negative influences.  

"The trend remains firmly downward," says BNZ's Senior Economist, Doug Steel.

"It is always difficult to know the precise drivers of any particular PMI result, but judging by respondent comments, falling sales, rising costs, and election uncertainty are currently all part of the mix."

Breaking the report down still further, the PMI shows the index for new orders is nearly 10 full index points below its average in a clear sign that demand is softening.

The production index is similarly weak, being nearly nine index points below its respective normal.

The report says the only major index close to its long-term average is stocks of finished products. However, the new orders-to-stocks ratio remains an adverse signal for production ahead.

On the question of employment, the PMI has shown this has slipped as well.   

"Softer labour demand fits with indicators from the Quarterly Survey of Business Opinion showing manufacturers’ labour constraints have eased over the past six months."

The report also compares New Zealand's situation with that of overseas countries. 

"It is no secret that PMIs around the world have been generally struggling for some time," it says.

"After broadly matching this tendency, albeit with, not surprisingly, more volatility – NZ’s PMI has moved more decisively lower over recent months relative to the global index.

"One can only wonder if the widening gap reflects rising reservation on the part of local manufacturers as NZ’s election approaches, or something else," the report authors say.