New Zealand Manufacturing Sector Contracts in May Amid Weak Demand and Energy Pressures]

New Zealand Manufacturing Sector Contracts in May Amid Weak Demand and Energy Pressures]

New Zealand’s manufacturing sector returned to contractionary territory in May, with the BNZ-BusinessNZ Performance of Manufacturing Index dropping to 49.9 from April’s 50.4. The decline signals a loss of momentum from March’s 52.8 reading and positions the index below its long-term average of 52.5, indicating the sector continues to face significant headwinds in establishing a sustained recovery.

According to BusinessNZ Director of Advocacy Catherine Beard, the retreat into negative territory reflects weak customer demand, elevated fuel costs, and ongoing geopolitical uncertainty stemming from the Middle East conflict. The survey results reveal a mixed operational landscape, with deliveries (51.9) and finished goods inventories (53.8) maintaining expansion levels, while production, employment, and new orders remained largely flat around the neutral 50 mark, suggesting underlying weakness persists.

A stark divergence emerged between business sizes, as smaller enterprises underperformed significantly. Businesses with fewer than 10 employees recorded a contractionary 46.0, contrasting sharply with larger firms exceeding 100 employees, which achieved a robust 57.6. Looking forward, BNZ Head of Research Stephen Toplis anticipates a relatively flat winter period for the sector but notes that broader economic momentum could re-emerge later this year, contingent on Middle Eastern developments. For now, manufacturing remains susceptible to continued demand weakness and elevated energy cost uncertainty.

Key Indicators (April – May):
| Category | Apr | May |
|———-|—–|—–|
| PMI | 50.4 | 49.9 |
| Production | 51.4 | 50.0 |
| Employment | 53.2 | 49.6 |
| New Orders | 48.0 | 50.1 |
| Finished Stocks | 50.7 | 53.8 |
| Deliveries | 46.8 | 51.9 |

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