Manufacturing activity has slowed over August as the resurgence in Covid-19 and restrictions stoked caution in the sector.
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The BNZ Business New Zealand Performance of Manufacturing Index (PMI) fell more than 8 points in July to 50.7, just in expansion territory.
BNZ senior economist Doug Steel called the August result commendable but said the threat of future lockdowns was putting firms off hiring.
"[The PMI] has fallen back heaps from where it was in July and I guess this just reflects the movement in the alert levels around Covid-19 with Auckland going into alert level 3."
The employment sub-index gained 2 points to 49, but has been in contraction for six months in a row, pointing to jobs being shed.
"Even if we are at the moment seeing quite good new orders, which is the positive aspect of the survey, businesses are just not confident enough to take on more staff and indeed the index still below 50 with respect to employment suggests that job losses are continuing," Steel said.
Production, new orders and finished stocks increased during August, but deliveries fell by about 11 points to 47.2.
There was strong growth in manufacturing activity in the central and Canterbury region for the month, however, Auckland and Southland reported sharp falls.
Steel said the data was prone to big swings from month to month as a result of the pandemic.
The latest BNZ-Seek job numbers were also released show listings fell by 3 percent in August, and are down by nearly a third on a year ago.
