A big slump in manufacturing output is pointing toward a possibly larger drop in GDP during the June quarter past than has been forecast thus far.

Earlier high frequency data had suggested that after GDP grew 0.8% in the March quarter there had been a substantial ‘stall’ in June quarter 2025.

Indeed the Reserve Bank in its recent sharp ‘dovish pivot’, forecast a 0.3% drop in June quarter GDP. At the same time the RBNZ dropped the Official Cash Rate from 3.25% to 3.00% and suggested the OCR may be as low as 2.5% by the end of this year.

But other major bank economists had been less pessimistic than this about the GDP outcome, with the figures due to be released on September 18.

However, on Tuesday, Statistics NZ released manufacturing and wholesale trade data for the quarter. These are key components of the GDP outcome.

And the manufacturing figures were bad.

Stats NZ said the volume of total manufacturing sales fell 2.9%, following a 2.4% rise in the March 2025 quarter. The value of total manufacturing sales fell $1.0 billion (3.0%), following a $1.6 billion (4.8%) rise in the March 2025 quarter.

When adjusted for seasonal effects, the total value of wholesale trade sales fell 0.1% ($21 million) in the June 2025 quarter, following a 3.4% ($1.3 billion) rise in the March 2025 quarter.

The wholesale trade figure perhaps doesn’t sound as bad – but economists had expected this one to grow.

But I would say the manufacturing figure has come as a bit of a a shock. And there was further bad news on construction in Tuesday’s figures.

Stats NZ said last week that the seasonally adjusted volume of building work done in the June quarter fell 1.8%, which was a bit weaker than expected after an upwardly revised 1.3% rise in the March quarter.

However, separate construction sales data including a wider range of construction services and civil engineering projects, released at the same as the manufacturing sales figures, showed a 3.1% drop in sales after a 0.7% rise in the March quarter.  Stats NZ said after adjusting for price changes and inflation, building activity volumes decreased by 18% over the two years to the June 2025 quarter.

BNZ senior economist Doug Steel said the BNZ economics team had now dropped their GDP forecast to a 0.5% fall from a 0.2% fall prior to release of the figures on Tuesday.

On the manufacturing figures, Steel said, after adjusting for inventory change, “we estimate the sector’s GDP fell 3.5% [quarter-on-quarter], a bigger drop than we already anticipated”.

“Manufacturing activity declines were prevalent across significant parts of the manufacturing sector, with falls noticeable in food processing, chemical, non-metallic mineral products, metals, and transport and machinery equipment manufacturing,” Steel said.

“Manufacturing weakness follows from some major industrial plants limiting output during the quarter, some of which have restarted in Q3. Meat processing was exceptionally weak in Q2, with limited stock at the tail end of the season,” he said.

“…The manufacturing shutdown/restarts and swings in food processing are important to note, as it increases the chance of a decent bounce back in Q3 activity even if it is only technical in nature. While we have lowered our Q2 GDP estimate, we also lift our pick for Q3 (from +0.5% to +0.7%).

“This leaves us comfortable with our expectation that the RBNZ will continue lowering the cash rate,” Steel said.