The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) saw a modest increase of 1.4 points in August, reaching a level of 45.8. Despite this uptick, it marks the 18th consecutive month of contraction for the manufacturing sector, indicating ongoing challenges within the industry.
BNZ senior economist Doug Steel noted that while the manufacturing sector has been facing difficulties, the PMI reflects the realities of the economy. He emphasised that despite recent gains in business confidence—which, according to ANZ’s August survey, has seen an increase by 23 points to a net 51% optimism—the conditions within the sector remain tough.
The Performance of Manufacturing Index saw all five sub-indices remain in contraction but showed encouraging signs of improvement, particularly in the areas of production, employment, and new orders.
Steel noted that if this trend continues, it could point to a lift in demand for the manufacturing sector.
He also noted that the Reserve Bank’s decision to cut the Official Cash Rate (OCR) in August has contributed to improved business confidence. However, Steel cautioned that it will take time for the lower OCR to generate a pickup in sales.
The BNZ-BusinessNZ PMI is a crucial monthly survey that serves as an early indicator of manufacturing activity in New Zealand. A PMI reading below 50 signifies a contraction in the sector, while readings above 50 indicate expansion. The latest figure of 45.8 remains significantly below the neutral mark, reflecting persistent difficulties in the manufacturing industry.
