11 Nov 2022

Drop in new orders points to downturn in manufacturing - BNZ index

11:48 am on 11 November 2022
Industrial worker in manufacturing plant grinding to finish a pipeline.

The decline in new orders means New Zealand is following a trend being witnessed in many other countries, the head of BusinessNZ says. (File pic) Photo: 123RF

Manufacturing has taken a turn for the worse, falling into contraction last month for the first time this year, with a significant drop in new orders.

October's BNZ - BusinessNZ Performance of Manufacturing Index (PMI) fell to a seasonally adjusted 49.3 points, indicating manufacturing contracted last month.

That compared with 52 points in September, with any reading above 50 indicating expansion.

BusinessNZ director Catherine Beard said the October result mirrored similar readings overseas.

"Given the global PMI signalled a second successive monthly contraction to stand at 49.4, it appears New Zealand now has a common thread with many other countries of decreasing production and a drop in demand for new orders," she said.

The two key sub-index values of production (49.9) and new orders (44.7) contracted, with the latter falling significantly from its near 60-point mark in August.

Employment at 48.9 points was the lowest level of activity since November 2021.

Manufacturers' comments were mostly negative at 61.6 percent, which was nearly unchanged from 61.5 percent in September, with staff shortages and a fall off in new orders mentioned by a significant proportion of respondents.

BNZ senior economist Doug Steel said new orders were falling while stocks expanded above long-term norms.

"A low orders-to-inventory ratio typically bodes ill for production ahead," he said.

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