According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI), New Zealand’s manufacturing sector contracted slightly in May.

The seasonally adjusted PMI for May was 49.9 (where a reading above 50.0 indicates that the manufacturing sector as a whole is expanding, and a reading below 50.0 indicates a contraction). This was down from 50.4 in April and 52.8 in March. The long-term average for the index is 52.5.

BusinessNZ’s Director of Advocacy, Catherine Beard said: “It is disappointing to see the PMI slip back into negative territory, even though the reading was only just under 50.0. Manufacturers are obviously struggling in the face of a combination of adverse influences, including lack of customers demand, high fuel prices and the conflict in the Middle East”.

The sub-indexes of the PMI suggest that firms are adding to their stocks of finished goods (53.8) and getting deliveries out of the door (51.9), but the production, employment and new orders sub-indexes were all flat, at around 50.0.

The results also showed that micro-firms (0-10 employees) were struggling the most, with a sub-index reading of just 46.0. However, at the other end of the scale, large firms (101+ employees) were performing strongly, with a sub-index reading of 57.6.

BNZ Head of Research, Stephen Toplis, said “We believe the sector is likely to go through a flat patch during winter but, Middle East willing, we still think the broader economy can pick up some momentum at the tail end of this year so there is no reason to believe manufacturing will be an exception.”