Business

Manufacturing sector shrinking, negativity up - index

14:20 pm on 20 January 2023

The index's main components of new orders, production, employment and deliveries all remained in contraction. (file image) Photo: 123RF

The manufacturing sector remains mired in gloom, with activity stuck at its lowest level in 15 months in December amid weak orders and production.

The BNZ-Business New Zealand performance of manufacturing index (PMI) was unchanged at 47.2, with a reading below 50 indicating the sector is shrinking.

The PMI was in contraction for the last three months of 2022.

"Perhaps the best that one can say about December's PMI result is that it didn't get any worse as it matched November's ... but that is of little solace when another sub-50 reading indicates that the manufacturing sector continued to contract into the end of last year," BNZ senior economist Doug Steel said.

The index's main components of new orders, production, employment and deliveries all remained in contraction.

"Persistent weakness in new orders over recent months, especially in relation to inventories, is not a good sign for sales nor production ahead."

BusinessNZ advocacy director Catherine Beard said the level of negativity among businesses had risen to 63.5 percent of comments received from respondents, up from 58.4 percent in November.

She said labour shortages and supply chain disruptions remained major problems.

"New Zealand manufacturers may need to brace for a challenging 2023 ahead."

Activity was weakest in the upper half of the North Island, sitting just above a six-month low, with the lower North Island also in contraction. But the South Island's two regions were expanding, with the strongest growth in Otago.

The manufacturing data followed weak retail spending in December, backing views the economy is grinding to a halt in the face of high inflation and rising interest rates.