New Zealand’s manufacturing sector continued to expand in March, but at a slower pace, according to the latest BusinessNZ PMI report.
The seasonally adjusted PMI registered 53.2 for March, down from 54.8 in February and January’s 55.0. While the current reading represents a slight decline, the figure remains above the long-term average of 52.5 and the 50.0 expansion threshold.
“It is gratifying to see that the manufacturing sector is still expanding but, at the same time, it is concerning to note that the proportion of businesses commenting negatively about their situation increased to 62.0%, from 44.5% in February,” said Catherine Beard, BusinessNZ’s director of advocacy. Feedback from the survey’s respondents pointed to significant worry among manufacturers regarding the ongoing war in Iran and its wider consequences.
While the index is no longer trending higher, it has not yet been significantly affected by the fuel price surge and uncertainty stemming from the conflict, though analysts caution this could be a case of “too soon” to see the full impact.
Looking at specific components of the index, new orders remained the strongest sub-index at 55.8, while deliveries of raw materials was the weakest at exactly 50.0.
Other sub-indices showed varying degrees of strength, with production at 53.8, employment at 51.4 and stocks of finished products at 54.0.
The rise in the stocks of finished products index to its highest level in a year suggests businesses may be stockpiling, potentially bringing forward spending in anticipation of supply challenges.
The proportion of positive comments from manufacturers plummeted from 55.5% to 38.0% in March. This sharp decline in sentiment, despite only a modest dip in the overall PMI, indicates that energy price shocks are front of mind for many in the sector, according to the report.
This aligns with broader declines in business and consumer confidence observed during March, though it has not yet significantly reduced demand, as evidenced by the strong new orders figure.
“The PMI result supports our view that economic growth was reasonable in the first quarter of the year, even though material headwinds had accumulated by quarter’s end,” said Doug Steel, senior economist at BNZ.
