Activity in New Zealand’s manufacturing sector showed some small signs of improvement, although still in contraction, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for July was 44.0 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 41.2 in June, but still significantly below the long term average of 52.6. The sector has now been in contraction for 17 consecutive months.

BusinessNZ’s Director, Advocacy Catherine Beard said that while the July result showed some improvement from June, the numbers still told the story of a sector continuing to struggle.

“The key sub-index results for Production (43.4) and New Orders (42.5) both returned to figures above the 40-point activity level, although both still showing significant contraction. In contrast, Employment (43.1) continued to plunge further, as did Finished Stocks (46.5)”.

Given the relative improvement in activity for July, the proportion of negative comments stood at 71.1% in July, compared with 76.3% in June. Negative comments outlined a lack of orders, customers and sales continuing recent trends.

BNZ’s Senior Economist Doug Steel said that “manufacturing activity will turn when the broader economy turns. Easing monetary conditions will help in this regard, but it will take time for the likes of a lower OCR to generate a general pick up in sales”.