The downward economic trend for the NZ SME manufacturing industry has stabilised, with key signals pointing to a recovery, according to new data from inventory management software company, Unleashed. 

The quarterly Unleashed Manufacturing Report showed purchasing activity by New Zealand manufacturers rose in Q3 for the first time since the end of 2022, indicating future growth for Kiwi producers.

The 6.2% average rise in purchase orders over the past three months, combined with stabilising sales revenue, comes after a sustained period of decline for the wider sector.

Unleashed Head of Product Jarrod Adam said New Zealand manufacturers had been waiting for a break in the economic clouds, and these positive metrics could be the start of further good news.

“This is the first time we have seen purchase orders rise in over a year and a half, which points to the difficult situation that many local manufacturers have been in of late. The news will bring welcome relief to many businesses, and may be the sign that the storm is over and some brighter days are ahead for NZ Inc,” Adam said.

Unleashed’s report analyses business performance across 12 manufacturing sub-sectors in Australia, NZ, and the UK – drawing on the live sales, inventory, purchasing, lead time and profit margin data managed within their cloud software platform – to assess the overall health of the sector.

Purchase orders up 6.2% (June 31 2024 to September 31 2024)

For the manufacturing sector, which generally has long sales cycles, tracking purchase orders is a useful predictor of future revenue.

Purchase order numbers have been dropping consistently over the past three years (with exception of Q4 2022). While still down 26% on the same quarter in 2021, at an average of 82 orders, the change marks an important turning point for local producers.

In a similar vein businesses appear to be preparing to take advantage of increased sales by stockpiling. On average excess stock in New Zealand is up 16.24% on last quarter, a strong indicator of businesses preparing for increasing sales to end the year.

“Seeing purchase orders on the rise should give businesses confidence that the economy is turning around. Our expectation is that positive metrics will increase as these orders are filled and higher sales volumes normalise. New Zealand manufacturing has been in a tough spot, but those businesses that emerged from this period stronger will be primed to take advantage of improving economic conditions,” Adam said.

Sales revenue stabilising

On average sales revenue for NZ manufacturers is stabilising, after a severe downward trend over the previous four quarters. In Q3 2024, average sales revenue dropped -0.72%. While this is a negative metric, it is a vast improvement from the previous quarter which was down -9.40%.

Of note, manufacturers supplying  the Building and Construction industry saw sales revenue rise 7.28% this quarter. This was the first time revenue has been positive for the sector since Q4 2022, and points to a major turnaround for an industry that has struggled of late.

The Personal Care sector bucked the trend with a huge surge in sales revenue, up 51.85% this quarter. This sector has continued to be a high performer amid the recent economic struggles, with only one out of the previous 10 quarters seeing sales revenue drop.

Beverages with cause for celebration, food less so

The New Zealand Beverage industry – which has faced extremely tough times during the past few years – is finally enjoying increased sales revenues, up 10.05% on average this quarter.

Pointing to further potential gains, beverage manufacturers increased excess stock levels, this quarter by 24.93% as they prepare for sustained higher levels of sales.

Steam Brewing Company Brewhouse Manager Chris Ward said in the last few months the previous year’s pinch in spending has seemed to shift.

“In the last few months there’s been a definite change in mood. Brewers seemed to be playing it cautious through winter, but you can see some optimism now, be that from beer, cider, or non alcoholics.”

“We weren’t expecting production to ramp up as much as it has, and hope that it continues,” Ward said.

On the other hand, Food manufacturers are not doing so well, and recorded a drop in sales revenue of -9.36%. The food manufacturing industry remains in a tough spot, with  manufacturers wary of being  caught out with excess stock and wasted product.

Building and Construction levelling up

This quarter the Building and Construction manufacturing industry saw a healthy increase in sales revenue, up 7.28% on average.

This is the first time the industry’s sales revenue has increased in almost two years, and shows signs of an industry potentially turning a corner.

Building and Construction can often tell the story of the broader industry, which bodes well for NZ Inc as a whole, Adam said.

“Manufacturers supplying the construction industry placed an average of 103 purchase orders last quarter – that’s a big uptick on the yearly average of 74.”

“As it is heavily exposed to supply chains and inflation, the Building industry is often the first to see negativity, but at the same time it is also the first to see the green shoots of an economy on the rebound. The fact that this industry is seeing increasing sales revenue, profitability, and purchasing points to a potential change of fortunes for the entire sector,” Adam said.

The Manufacturing Health Index assesses SME manufacturer performance via a big data approach. Starting with a cohort of 1,282 manufacturers in the UK, Australia and New Zealand, the Q3 2024 report draws on data from every purchase, sale and stock movement made by each business in the study between Q1 2018 and Q3 2024.