Manufacturing hits post-Covid low

By earthnews
5 months Ago

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Business New Zealand director of advocacy Catherine Beard said the sector was in dire straits.
Photo: 123RF

Activity in the manufacturing sector is in freefall, with demand faltering and production low.

The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) fell 5.5 points in June to 46.6 – a reading below 50 means the sector is contracting.

It was the 16th consecutive month of contraction, and the lowest rating in 15 years outside of the Covid-19 lockdowns.

Demand is expected to keep falling with new orders going backwards for 22 months, longer than during the global financial crisis (GFC).

BNZ head of research Stephen Toplis said manufacturers were not out of the woods yet.

“While the weakness in these series have not been as deep as during the GFC, the length of it has been longer, and it is not over yet. Manufacturing activity is highly leveraged to domestic demand, particularly residential construction and household spending. Both of these are faltering.”

Business New Zealand director of advocacy Catherine Beard said the sector was in dire straits.

“New orders is a good indicator and that’s pretty low. Production is also very low at 35.4 [points] and employment is in contraction.

“I think that manufacturers have been trying really hard not to lay people off, because they’ve all still got those memories of an incredibly tight labour market where they just couldn’t get workers and have been very reluctant to shed workers.

“It’s definitely looking like a tough run to the end of the year and not rosy at all.”

The NZ Institute of Economic Research’s June Quarterly Survey of Business Opinion found falling sales and cost increases had a net 73 percent of manufacturers report profits were in decline, a record low.

The PMI report said manufacturing would turn when the Reserve Bank eases interest rates.