Positive signs of an upturn in demand for struggling manufacturing sector

Activity in the manufacturing sector edged up last month but remains firmly in contraction for the 19th consecutive month.

The BNZ-Business New Zealand Performance of Manufacturing Index (PMI) rose 0.8 points in September to 46.9 - the best result since April.

A reading below 50 indicates contraction, and follows a revised 1.5 percent rise in August.

Production and new orders lifted to their highest levels since April 2024 and November 2023 respectively, but they remain below break-even levels.

BNZ senior economist Doug Steel said all sub-indices were below their historical average, but four out of five have moved closer to break-even.

"While not indicating expansion, they continued to improve in September and if this trend persists it is not far from indicating an upturn in demand," Steel said.

Employment levels contracted slightly, which Steel said was of no surprise given the recent Institute of Economic Research's Quarterly Survey of Business Opinion (QSBO).

"A staggering net 55 percent of manufacturers responding to the QSBO reported that they had laid off staff in the last quarter. This is the worst reading in the history of this series which dates back to 1961," he said.

"For many firms it will be the reduction in labour costs that eventually returns the business back to profitability, but for those who lose their jobs this will be little consolation."

BusinessNZ's advocacy director Catherine Beard saw the positive side of the PMI recording its best result since April.

But she said the "bad news" was that it appeared to be a "long and slow road" to see the sector return to expansion.