15 Oct 2021

Easing of Covid-19 restrictions sees manufacturing sector bounce back

3:09 pm on 15 October 2021

Manufacturing activity is starting to rebound as the sector recovers from the partial easing of restrictions.

Q-West Boat Builders welding fabricator Grant Loveridge works on a new ferry for the Auckland market.

Photo: RNZ / Robin Martin

The BNZ-Business New Zealand Performance Manufacturing Index (PMI) for September is up 11.7 points after August's slump, to sit at 51.4.

A reading above 50 indicates the sector is expanding, and below 50 indicates contraction.

The northern region remains in contraction because of Auckland's ongoing lockdown, but it too is showing signs of recovery.

But BNZ senior economist Craig Ebert said production (49.9) and inventory (50.1) indexes remained flat, with deliveries of raw materials (47.8) contracting, meaning a full recovery looks some way off.

"A lot of it will in turn depend on those restrictions and how they're able to be eased over the coming months. So we're constantly adjusting our view of the degree of rebound," he said.

Ebert said the rebound in PMI for September was encouraging, despite the some frayed parts.

"Credit where it's due though, as the NZ PMI traced much less of a contraction, and quicker stabilisation, compared to what it went through during the initial outbreak of Covid‐19."

Among the reasons to be guarded about the PMI was that the majority of respondents' comments had a negative skew, Ebert said.

"These were unsurprisingly dominated by references to the Covid-wrought lockdowns, with Auckland's situation lamented by firms right across the country with Australia's lockdowns also getting a mention as a drag.

"The slow release of Auckland from Covid‐related restrictions, relative to the rest of the country, was echoed in the regional breakdown of the PMI."