MANUFACTURING activity in New Zealand dropped in June to its third lowest level since starting in 2002, according to a survey released earlier this week.
The Bank of New Zealand – Business NZ seasonally adjusted performance of manufacturing index (PMI) was at 45.7 points last month, with anything below 50 points indicating activity is contracting.
Business NZ chief executive Phil O’Reilly said the first half of 2008 has been the toughest six months manufacturers have had to deal with for some time, with the possibility of ongoing contraction for the next half of the year.
In the latest survey, four of the five main diffusion indexes recorded ongoing weakening.
Production fell to its lowest result of 42.3, new orders at 44.8 was similar to March, and employment remained in decline with its second lowest value of 45.6.
Bank of New Zealand senior economist Craig Ebert said businesses were hit by rising raw material prices, putting pressure on margins and forcing firms to control their costs rigorously.
Deliveries of raw materials at 41.9 had the lowest value of any main index for the history of the survey.
Unadjusted results for various industries showed a mixture of expansion and decline in June.
The machinery and equipment sector at 53.1 had its fourth consecutive expansion, while textile, clothing, footwear and leather on 52.9 expanded after six straight declines.
The food, beverage and tobacco sector expanded to 51.2 after four months of contraction.
In contrast, the petroleum, coal, chemical and associated product sector had a sharp fall to 33 points, while the wood and paper product sector remained under 40 with a 36.6 reading.