The manufacturing sector has reported a decline in activity for the fourth consecutive month, with the latest data showing the lowest level of activity since November 2022. According to the BNZ-Business New Zealand Performance of Manufacturing Index (PMI) for June, the reading stood at 47.5. A reading below 50 on the PMI indicates a contraction in manufacturing activity.
BNZ Senior Economist Craig Ebert noted that manufacturing activity has continued to weaken and is currently well below its long-term average. The PMI decreased to 47.5 in June, down from 48.7 the previous month, reflecting a 1.2-point drop since May.
Ebert expressed disappointment with the June figures, given the challenging economic environment. He also pointed out that global manufacturing is facing similar struggles as economic pressures lead to a reduction in big-ticket investment items.
Specifically, production (47.5) and new orders (43.8) contributed to the decline in June, pushing the manufacturing sector further into contraction territory. Employment (47.0) also experienced a drop.
In terms of employment, the PMI’s Employment index softened to 47.0 in June, down from 49.3 in May. The outlook for manufacturing remains subdued, indicating a further decrease in output.
Ebert highlighted the broader economic context, where slowing down is necessary to alleviate inflationary pressures. He noted that the economy has already been delivering weak results, and there is no indication of an early resurgence.
To find a weaker reading than the current one, one would need to go back to August 2021 (39.0), during the Delta strain outbreak of COVID-19, which led to level-4 lockdowns. In comparison to the global PMI counterpart, which eased to 48.8, the NZ PMI remains lower.
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