Activity in the manufacturing sector hit its highest level in more than two years last month, driven by pent up demand, but jobs are still being lost and a slowdown looms with the resurgence of Covid-19.
The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) for July rose 2.6 points to 58.8 - the highest level since April 2018.
A reading above 50 points indicates growth.
"July's PMI had firmly set up the idea that manufacturing GDP would bounce back strongly in the third quarter after what was surely a very large decline in second quarter," BNZ senior economist Doug Steel said.
"The latest virus outbreak calls that into question and adds to the reservations that we already had for growth in the fourth quarter."
The latest expansion was led by a surge in new orders, which hit a 14-year high and supported gains in production and deliveries.
However, inventories were softer, and the employment sub-index fell slightly and remained in contraction, pointing to firms still shedding jobs.
"This aligns with the thinking that the pickup in new orders and activity to date had not been enough or expected to improve or last long enough to fully occupy the existing force work, let alone take on more staff," Steel said.
A companion survey of the services sector will be issued next week.