A survey of the manufacturing sector shows activity flattening in July after 10 consecutive months of expansion, raises concerns at the strength of economic recovery.The BNZ-BusinessNZ performance of manufacturing index was a seasonally adjusted 49.9 in J
A survey of the manufacturing sector shows activity flattening in July after 10 consecutive months of expansion, raises concerns at the strength of economic recovery.
The BNZ-BusinessNZ performance of manufacturing index was a seasonally adjusted 49.9 in July, down 6 points from June and the first time in 11 months it had slipped below the 50-point mark.
An index reading above 50 points indicates manufacturing activity is activity, while below 50 that it is contracting.
BNZ senior economist Craig Ebert said the slump in the manufacturing index was a bolt from the blue, and a material disappointment.
The sector had been looked to as leading a firm hand to the economic recovery, he said.
While the latest index result questioned the recovery, he was not convinced it was over.
It was conceivable that the latest data were simply acknowledging further bumps, and that was the tack he preferred to take for the meantime.
"But that's not to say we're oblivious to the risks that a more fundamental slowdown could eventuate," Mr Ebert said.
The fall in the index could not have been driven by a worse component, with new orders falling to a seasonally adjusted 47.6 in July from a solid 57.4 in June.
Warnings that a slowing in the manufacturing sector was in the immediate pipeline would not be such as big deal if other sectors were at hand to take up the slack, but not that many sectors were able to, Mr Ebert said.
The state of the building sector -- looking sorrier by the day -- was one of the worries for manufacturers, with a good deal of local manufacturing dependent on the local construction cycle.
At the same time, the dampeners were not just domestic, with many of the globe's industrial growth gauges also coming off the boil.
Despite all the news, the death knell for this country's economic recovery, or even for the local manufacturing sector, was not necessarily being signalled, Mr Ebert said.
As bad as the New Zealand manufacturing index looked in July, it was much dented by a few devilish details, rather than being an across the board loss of momentum.
"Indeed, there seemed almost as many go-forward bits as negative ones, albeit with the latter enough to drag the averages down."
The possibility could not be discounted that the index drop was more noise than signal.
