The manufacturing sector remains in expansion mode, albeit at a slower pace, as firms took a more cautionary tone in July.
The BNZ-Business New Zealand Performance of Manufacturing Index fell 5.8 points last month to 54.3 – a reading above 50 indicated the sector was expanding.
“We acknowledge 54.3 is softer than June’s staggering result, however, some month-on-month volatility in the PMI is common and not an immediate cause for concern,” BNZ senior economist Doug Steel said.
Production was the strongest at 57.3, followed by deliveries at 55.8 and new orders at 53.3.
Employment was the weakest sub index, but remained in expansion at 52.8 – indicating some level of job creation in the manufacturing sector.
Steel said despite the overall expansive theme, there were some “cautionary tales”.
“Businesses that returned negative commentary cited geopolitical tensions and fuel price volatility as key concerns, while higher raw material costs, inconsistent forward orders, and softer consumer spending serve a reminder of the headwinds facing an otherwise resilient industry,” he said.
BusinessNZ head of advocacy Catherine Beard said after June’s “exceptional result” it was not a surprise to see momentum ease but conditions were solid.
“What’s more concerning is the shift in sentiment, with 57 percent of comments being negative,” Beard said.
“Respondents continue to point to the conflict in the Middle East, high fuel and raw material costs, and a general reluctance from customers to spend, with a number also citing uncertainty ahead of the election.”
Steel said overall, the numbers suggested the sector started the third quarter positively after a more subdued second quarter due to the US-Iran war.