On the improve

Activity in New Zealand’s manufacturing sector continued to show improvement in February, but still remained in contraction, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for February was 49.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 47.5 in January and the highest level of activity since February 2023. However, the sector has now been in contraction for 12 consecutive months.

BusinessNZ’s Director, Advocacy Catherine Beard said that the improved February result showed signs of a gradual turnaround in the sector.

“The key sub-index of Production (49.1) was at its highest level since January 2023, while Deliveries (51.4) was at its highest point since March 2023. However, New Orders (47.8) has now remained in contraction for nine consecutive months and likely needs to get much closer to the 50-point mark to edge the sector back into expansion”.

The proportion of negative comments in February stood at 62%, which was down from 63.2% in January but up from 61% in December. A lack of orders (both domestic and offshore) was mentioned by many respondents, as well as the general slowdown in the economy.

View the time series data On the improve | BusinessNZ

BNZ’s Head of Research Stephen Toplis said that “New Zealand’s manufacturing sector is still in recession, but this month’s PMI indicates there is light at the end of the tunnel. The 49.3 reading is within a smidgen of “breakeven” and the new orders to inventory differential provides support for an increase in production. Moreover, New Zealand’s underperformance against the rest of the world is narrowing quickly”.

BNZ PMI Commentary Feb 2024