Saturday, October 5
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Manufacturing sector marks a year-and-a-half in contraction – survey


Interior view of a warehouse with racks, pallets, goods, forklifts

The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) rose 1.4 points in August to 45.8 points.
Photo: 123RF

Manufacturing sector activity has improved slightly, but remains deeply in contraction.

The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) rose 1.4 points in August to 45.8 points, its 18th consecutive month in contraction.

BNZ senior economist Doug Steel said the sector had been struggling but the PMI indicated what was happening in the real economy, despite recent improvements in confidence surveys, and conditions in the sector remained challenging.

“Our economic forecasts remain for the manufacturing sector to turn when the broader economy turns.”

The PMI’s five sub-indices were all in contraction, but showed signs of improvement notably in production, employment and new orders.

Steel said the indicators were less pessimistic, which was a step in the right direction and if it continued pointed to a lift in demand.

The PMI and its companion services sector survey have assumed more importance in Reserve Bank thinking because they provide more up-to-date economic indicators to be taken into account when setting interest rates.

“Business confidence has improved further following the Reserve Bank of New Zealand’s official cash rate (OCR) cut in August. While falling interest rates will support demand, it will take time for the lower OCR to generate a pick-up in sales.”



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