According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI), New Zealand’s manufacturing sector continued to expand in July, but at a more moderate pace.

The seasonally adjusted PMI for July was 54.3 (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 60.1 in June but still above 51.5 in May and well clear of the survey’s long-term average of 52.5.

BusinessNZ’s Director of Advocacy, Catherine Beard said: “After last month’s exceptional result, it’s not surprising to see some of that momentum ease, but a reading of 54.3 still represents solid expansion for the sector. What’s more concerning is the shift in sentiment, with 57% of comments being negative. Respondents continue to point to the conflict in the Middle East, high fuel and raw material costs, and a general reluctance from customers to spend, with a number also citing uncertainty ahead of the election.”

The respondent comments showed that cost pressures, from fuel and freight through to raw materials and the ongoing Middle East conflict remain front of mind for many manufacturers, though a fair share pointed to steady order books and stronger export sales as reasons for optimism.

Every sub-index remained in expansion, though all eased from June’s remarkable levels. Production was the strongest at 57.3, followed by Deliveries at 55.8. New Orders fell back to 53.3, Finished Stocks eased to 53.2, and Employment was the weakest at 52.8.

BNZ Senior Economist, Doug Steel said “We acknowledge 54.3 is softer than June’s staggering result, however, some month-on-month volatility in the PMI is common and not an immediate cause for concern.”