New Zealand’s factories had their strongest month in almost five years in June, with a closely watched survey showing the manufacturing sector expanding at its fastest pace since the middle of 2021.
The BNZ and BusinessNZ Performance of Manufacturing Index jumped to 59.7 in June, up sharply from 51.3 in May and well above the survey’s long run average of 52.5. Any reading above 50.0 points to a sector that is growing rather than shrinking, and 59.7 is the highest the index has recorded since July 2021.
The size of the leap took even seasoned market watchers by surprise. In the accompanying report, BNZ Head of Research Stephen Toplis wrote that “frankly, we are staggered by the extent the Index has jumped”. He noted that the index had climbed from a seasonally adjusted low of 50.6 in April, and that once you set aside the sharp bounce that followed the Covid lockdowns, you would need to go back to May 2017 to find a stronger result.
What makes the June figure stand out is that every part of the index was firmly in growth territory. New Orders led the way at 64.1, which points to a healthy pipeline of work still to come. Production rose to 59.4, Deliveries reached 57.3, Stocks of Finished Products sat at 56.9 and Employment came in at 55.8. A reading above 50.0 on the employment measure suggests manufacturers were adding staff rather than cutting them, an encouraging sign for the roughly 220,000 people the sector employs.
Manufacturing matters more to the wider economy than its factory-gate image sometimes suggests. It contributes around eight per cent of gross domestic product and accounts for about 60 per cent of New Zealand’s exports, so a strong month on the factory floor tends to show up later in trade figures and regional job numbers.
The turnaround has been building for a while. The seasonally adjusted index sat at 48.4 in June last year, meaning the sector was still contracting twelve months ago. It edged above the line to 54.5 in February, slipped back to 52.8 in March and 50.6 in April, then firmed to 51.3 in May before the June surge. The run of numbers suggests the recovery is now broadening out rather than resting on a single strong month.
Small Business and Manufacturing Minister Cameron Brewer welcomed the result in a statement on 9 July. “This is a very strong result. Order books are filling up, production is climbing, and manufacturers are hiring again,” he said. Mr Brewer added that the June reading followed manufacturing being the single biggest driver of economic growth in the March quarter, and argued the momentum was “real and it’s building”.
The minister also used the figures to promote the Government’s Investment Boost policy, which lets firms claim a larger up front deduction when they buy new plant and equipment. “When order books fill up like this, manufacturers need to invest to keep pace, and that’s what Investment Boost is for, letting them buy the machinery and equipment that lifts productivity,” he said.
New Zealand’s factories are also doing well against the rest of the world. On the J.P. Morgan Global Manufacturing PMI released on 1 July, New Zealand’s 59.7 sat ahead of Japan on 54.8, the United States on 53.9, the United Kingdom on 52.5, China on 51.7, Australia on 51.5 and the Eurozone on 51.4. The global reading was 52.2, which means New Zealand manufacturers were expanding well ahead of the international pack that month.
The picture is not entirely without shadows. The survey gathers written comments from manufacturers alongside the headline numbers, and the June report, pointedly titled “What war?”, noted that the conflict in the Middle East and cost-of-living pressures were still front of mind for many respondents. What changed in June was that those worries were outweighed by firms reporting stronger sales, fuller order books and a renewed sense of confidence. Business surveys of this kind also measure sentiment and direction rather than the dollar value of output, so a very high reading signals momentum rather than a guarantee that the good run will last.
There is also a wider backdrop of tighter money. The Reserve Bank lifted the Official Cash Rate to 2.5 per cent earlier this week, its first increase in more than three years, and has signalled that further rises could follow before the end of the year. Higher borrowing costs eventually feed through to the investment decisions manufacturers are being encouraged to make, so the coming months will test whether June’s confidence holds as credit gets dearer.
For now, though, the survey paints the healthiest picture the sector has shown in half a decade. After a long soft patch that dragged into last year, order books are filling, production lines are busier and factories are taking people on again. The next reading will show whether June was a genuine turning point or a single strong month, but the direction of travel has clearly shifted.
What do you make of the manufacturing rebound? Are you seeing more work and more hiring where you are, or does it not match what is happening in your part of the economy? Let us know in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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