The manufacturing sector remains deep in contraction. Photo: UnSplash/ Silvia Brazzoduro
The manufacturing sector remains deep in contraction, with last month's reading only slightly better than June's dreadful result.
The BNZ-Business New Zealand Performance of Manufacturing Index rose 2.8 points in July to 44.0 points, which was an improvement on June's 41.2 reading.
But the latest reading was still well below 50 points, which indicates contraction.
"The manufacturing index in July, I guess the best thing you can say about it is that it was a little bit better than June," BNZ senior economist Doug Steel said. "But June was dreadful, so a little bit less dreadful in July, but still fairly challenging conditions for manufacturers out there at the moment."
The ongoing lack of demand had seen the manufacturing index contract for the 17th consecutive month, with all indicators in contraction, including production, employment, new orders, finished stocks and deliveries.
"If you look across the industries, most are below the 50 mark, suggesting contraction," Steel said.
"The household sector is clearly under pressure. Businesses themselves aren't investing as much as they used to be. The government is restraining demand. Even tourism, to the extent that they buy manufactured goods, not much joy there either.
"So no wonder that overall new orders is as well below 50, suggesting that manufacturers are seeing less demand through the factory door, and that's flowing back through to things like production and employment."
BusinessNZ director Catherine Beard said while the July result showed some improvement from June, the numbers told the story of a sector continuing to struggle.
Steel said the outlook for the rest of the quarter was uncertain, with the full effect of the wholesale electricity price surge yet to be seen.
However, he said a 25 basis-point drop in the Reserve Bank's official cash rate this week to 5.25 percent could improve optimism in the sector, though recovery was still some way off.
"It'll take quite some time, we think, before that easing in monetary conditions actually translates into a general pickup in sales."