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A further slide in manufacturing activity at the end of last year is pointing to the economy possibly dipping back into recession.
The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) fell 3.4 points to 43.1 in December, after a 3.8 point rise in November.
A reading below 50 shows the sector contracting, and it has been for 10 months in a row.
All the PMI’s sub-indices were in contraction with production falling to its lowest level since March 2009, excluding the Covid lockdowns.
BNZ head of research Stephen Toplis said the November rise looked like it was a “dead cat” bounce and the overall report was miserable.
“The December PMI reaffirms our view that economic conditions remain very difficult.”
“While we expect the economy, and the manufacturing sector, to gain some momentum by end 2024, the next few months will remain challenging especially with retail spending and construction activity being under pressure.”
He said strong migration and tourism would offer some support, but rising prices, consumers facing higher interest rates and eroding incomes, and a slowing construction sector would make it a “hard grind” for the first half of the year at least.
Toplis said most manufacturing sub-sectors had been going backwards for most of the past two years and that did not bode well for the broader economy, which unexpectedly shrank in the three months ended September.
“The manufacturing sector, as a whole, expanded in only one quarter of the last seven. Alas, December’s PMI suggests another negative reading is on the cards.”
A negative December quarter would meet the technical definition of a recession.
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