New Zealand’s manufacturing sector remains largely in a holding pattern, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for July was 49.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This is 0.6 points down from June and the lowest July result since 2008. The current result is the second time this year that manufacturing activity has slipped back into contraction mode.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the current result for New Zealand is to a large degree mirroring what is currently occurring offshore in the manufacturing scene.

“While the current New Zealand result represents a minor fall into contraction, spare a thought for the Australian manufacturing scene that fell significantly in July to 40.3. Their low result is partly symptomatic of high current costs within their sector.

“This provides both positives and negatives for New Zealand. On the plus side, it means we become more competitive on the global market for our products. However, the down side is that we still want Australia’s economy to remain healthy given a large proportion of our manufactured exports head across the Tasman.”

BNZ senior economist Craig Ebert said “Higher construction is good for local manufacturers, for obvious reasons. And so we’ve been pleased to see increasing signs of life in the various leading indicators of the building industry.”

Four of the five seasonally adjusted main diffusion indices were in contraction in July. The strongest result was for new orders (52.9), which actually improved 1.8 points from June. This was followed by production (49.6), which dipped into contraction after falling one point from June. Deliveries (49.1) were the only other index to record an improvement from the previous month, albeit still in contraction. Finished stocks (47.5) dropped 2.1 points from June, while employment (47.7) dropped to its lowest result since October 2009.

Unadjusted results by region largely mirrored what was seen in the national result. The Central region (50.7) led the way after three consecutive months of contraction, while the Northern region (49.3) dipped below the no change mark. The Canterbury/Westland region (49.1) improved on its June result, although has still spent three of the last four months in decline. The Otago/Southland region (45.8) fell back after two similar results around the no change mark.