New Zealand’s manufacturing sector fell into contraction for the first time in 2022, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for October was 49.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 2.4 points lower than September, and the lowest level of activity since August last year when there was a nation-wide COVID related lockdown.
BusinessNZ’s Director, Advocacy Catherine Beard said that the October result for New Zealand mirrors similar results overseas.
“Given the global PMI signaled a second successive monthly contraction to stand at 49.4, it appears New Zealand now has a common thread with many other countries of decreasing production and a drop in demand for new orders.
Looking at the specifics of the sub-index results, the two key sub-index values of Production (49.9) and New Orders (44.7) both fell into contraction, with the latter falling significantly from its near 60-mark in August. In addition, Employment (48.9) experienced its lowest level of activity since November 2021″.
Manufacturers have continued their negative mindset, with the proportion of negative comments at 61.6%, almost unchanged from 61.5% for September. Staff shortages and a fall off in new orders were mentioned by a significant proportion of manufacturers.
BNZ Senior Economist, Doug Steel stated that “new orders are falling while the PMI stocks index remains expansionary and firmly above its long-term norms. A low orders-to-inventory ratio typically bodes ill for production ahead”.
