The BNZ-Business New Zealand Performance Of Manufacturing Index (PMI) improved slightly to 48.8 from 47.4 in May. Photo: UnSplash/ Silvia Brazzoduro
- Manufacturing activity lifts, but remains weak at 48.8 - below 50 in contraction
- Four of five sub-indexes also in contraction
- BNZ says the economy may have contracted in June quarter
New Zealand's manufacturing slump continued in June, slowing the country's economic recovery.
The BNZ-Business New Zealand Performance Of Manufacturing Index (PMI) improved slightly to 48.8 from 47.4 in May.
A reading below 50.0 indicates contraction.
BNZ senior economist Doug Steel said the data showed manufacturers enduring difficult trading conditions, and pointed to the recovery running out of steam in the second quarter.
"The high frequency data, including today's PMI, is suggesting that growth will struggle to have a positive sign in it, in the second quarter.
"Indeed, I think there is increasing risk that the economy contracted in the second quarter."
Among the sub-indexes only new orders was expansionary, while three of the other four sub-indexes improved slightly but stayed in contraction, with finished stocks falling sharply.
Steel said the fall in stocks suggested manufacturers were destocking to improve their position.
"This volatility highlights just how difficult it is for manufacturers to forecast their order book at present."
Steel said momentum has slowed dramatically in the economy in the second quarter and the economy needs more help via lower interest rates.
BusinessNZ director Catherine Beard said the positive start to the year was being undone, and familiar issues remained the key challenges to the sector.
"Manufacturers report a major slowdown due to weak consumer demand, high living costs, and economic uncertainty.
"Falling construction activity, rising input costs, and global instability are reducing orders and cashflow, while supply chain issues add further pressure," she said.
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