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Manufacturing sector drops to lowest level of activity since last November

Interior view of a warehouse with racks, pallets, goods, forklifts
The outlook for the sector is expected to remain subdued according to BNZ. Photo: 123RF

The manufacturing sector contracted for the fourth month in a row in June to its lowest level of activity since November 2022.

The BNZ-Business New Zealand Performance of Manufacturing Index for the month was flat, at 47.5 - a reading below 50 indicates manufacturing activity is declining.

BNZ Senior Economist Craig Ebert said activity grew weaker and was well below its long term average.

The PMI subsided to 47.5 from 48.7 the month before - a drop of 1.2 points since May.

"It's obviously a disappointing number in the context of an economy that's already struggling," BNZ Senior Economist Craig Ebert said.

"Globally we notice that the manufacturing sector is struggling also - as a lot of people are under pressure some of the first things to go are the big ticket items in investment."

The level of production (47.5) and new orders (43.8) dragged the June result into further contraction, while employment (47.0) also shifted down a gear.

The PMI's Employment index softened to 47.0 in June, from 49.3 in May.

The outlook was expected to remain subdued and pointed to manufacturing output decreasing further.

"The broader backdrop is of an economy that is slowing down and for the most part needs to slow down to get rid of inflation pressure," Craig Ebert said.

"It's already been marking some fairly weak results and we didn't see any cause for it to spark up this early."

For a weaker reading, one would have go back to August 2021 (39.0), when the Delta strain outbreak of Covid-19 invoked level-4 lockdowns.

The result for June kept the NZ PMI lower than its global PMI counterpart, which eased to 48.8.