New Zealand’s manufacturing sector managed to stay in expansion territory in April, but only barely, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for April came in at 50.5 – down from March’s 52.8 and February’s 54.6.
Any reading above 50 indicates the manufacturing sector is expanding, while anything below signals a contraction. The long-term average for the index sits at 52.5, meaning the sector is now tracking well below its historical norm.
Fears of a major fallout from the closure of the Strait of Hormuz continue to weigh heavily on business confidence, with economic forecasters rapidly revising their growth expectations downward.
Catherine Beard, BusinessNZ’s director of advocacy, noted that the proportion of manufacturers reporting negative impacts on their business performance rose to 63.6% in April, up from 62% in March.
Many of the comments from the surveyed businesses focused on the impact of the war in the Middle East on freight and fuel costs, as well as on the delivery of raw materials.
Fuel price increases are visibly reducing the consumption of goods and services and putting pressure on business margins, but economic production has not yet shown significant signs of being hampered.
Analysts attribute this resilience to current metrics not yet fully capturing the expected downturn, alongside ongoing projects that were already underway.
The headline index and production levels have both been experiencing an accelerated decline over the past four months.
The production sub-index sat at 51.7 for April, and the stocks of finished products sub-index registered at 50.5. More concerning for future factory output are the forward-looking indicators, which have slipped into outright contraction. The new orders sub-index plummeted from 55.0 in March to 48.2 in April, marking its lowest level since May 2025.
The deliveries of raw materials sub-index slumped to 46.5, hitting its lowest point since July 2024. Industry analysts note that while it remains unclear whether delivery delays stem from supply-side availability issues or from factories intentionally reducing orders due to an anticipated drop in demand, the lack of factory inputs points to impeded future output.
“Whatever the case, the data are not great news for future activity,” they noted.
Reflecting on the shifting trajectory, BNZ Head of Research Stephen Toplis stated that the Performance of Manufacturing Index had been remarkably robust, with the headline reading for March down on previous months but still solidly above the breakeven line. However, Toplis added, “we feared it was only a matter of time before the wheels started to fall off and, alas, the April survey indicates that time may now have arrived.”
