BUSINESSDESK: New Zealand's manufacturing sector fell further into contraction last month, with employment at its lowest since July 2009, suggesting weaker demand in key export markets and a resilient kiwi dollar are hurting companies.

The BNZ-BusinessNZ performance of manufacturing index (PMI) fell 2.2 points to 47.2 in August from July, when the index slipped below 50 for the first time in three months.

A level of 50 marks the difference between contraction and expansion. All five seasonally adjusted diffusion indexes in the PMI contracted in August, the first time that has happened since October last year.

The PMI survey comes after Reserve Bank governor Alan Bollard kept the official cash rate at 2.5%, saying the weak outlook for the country's trading partners threatens economic growth and the strong kiwi dollar is hurting exporters and local manufacturers.

The employment index fell 2.1 points to 45.4, while production declined 1.9 points to 47.6. New orders and deliveries were both at 48.1 and finished stocks edged up 0.4 points to 48.

"The general message of manufacturing contraction in August is clear," says Doug Steel, economist at Bank of New Zealand. "The strong NZD is undoubtedly a major headache for many manufacturers" though manufacturing "globally is struggling".

The JPMorgan Global Manufacturing PMI shrank further to 48.1 in August, to reach the lowest in 28 months.