New Zealand’s manufacturing PMI on a ‘downward spiral’ in October

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Image credit: Photocreo Bednarek/stock.adobe.com

Market activity in New Zealand’s manufacturing industry has gone on a downward spiral into contraction in October, according to the latest BusinessNZ Performance of Manufacturing Index (PMI). 

The seasonally adjusted PMI recorded in October stood at 42.5– a significant decrease from September’s 45.1 and marks the lowest level of activity for a non-COVID-affected month since May 2009. 

Manufacturers responding to the survey have cited General Election uncertainty as a negative influence, which may have accelerated the PMI’s downtrend at the beginning of the year’s last quarter. 

Catherine Beard, Advocacy director at BusinessNZ, said the October result represented a further downward spiral of activity for the sector, which was seen across all the sub-index measures. 

“The key sub-index measures of Production (41.5) and New Orders (44.1) fell back from September, with the former at its lowest level for a non-COVID month since May 2009. Employment (43.3) decreased a further 1.8 points from September, while Deliveries (42.9) dropped 1.4 points,” Beard said. 

Meanwhile, the proportion of negative comments also stood at 65.1 per cent– down from 68.8 per cent in September and 66.7 per cent in August. 

Numerous manufacturers reported softening orders, and patchy or slowing sales for October. 

Respondents cited weakness in retail sales, residential construction, primary industries, and external demand weighing on new orders. 

The PMI new orders index was at 44.1 in October, which was not that different to September’s 44.8. However, the result indicates weakening, standing at more than 10 index points below normal. 

All major PMI components are significantly below normal. 

Doug Steel, senior economist at BNZ, said the current state of New Zealand’s PMI is “not a good look” for the nation’s GDP and employment growth. 

“Our GDP forecasts already include a decline in the manufacturing sector in the second half of 2023. There’s a chance that decline is bigger than we think if the PMI does not bounce in the final months of the year,” Steel noted.