A reading above 50 indicated manufacturing was generally expanding. Photo: UnSplash/ Silvia Brazzoduro
New Zealand's manufacturing sector has shifted into expansion for the first time in 23 months, according to the latest BNZ-BusinessNZ Performance of Manufacturing Index (PMI).
The seasonally adjusted PMI for January was 51.4 points, compared with December's 46.2 and the highest level of expansion since September 2022.
A reading above 50 indicated manufacturing was generally expanding, while anything below 50 indicated a decline. However, the January result was still below the average of 52.5.
BusinessNZ director Catherine Beard said the manufacturing sector had finally broken a long period of contraction to start 2025 on a positive note.
"All sub-index values were in expansion during January," she said.
The key sub-index results for production and new orders were at 50.9, with the latter at its highest level of activity since August 2022.
Employment (50.2) rose 2.5 points from December, while finished stocks (51.9) recorded its highest level since May 2024.
The proportion of negative comments from respondents stood at 57.7 percent in January, compared with 59 percent in December, though up from 56 percent in November and 53.5 percent in October.
She said negative comments during January focused on the holiday break, as well as the ongoing effects of the soft economy. Positive comments displayed no strong pattern, with many focusing on specific business opportunities.
BNZ senior economist Doug Steel said "the manufacturing sector [was] shifting out of reverse and into first gear".
"While the PMI still sits below its long-run average of 52.5, the improvement is welcome news for manufacturers after a very challenging two years."
He said the sector had been helped by falling interest rates, though there was heightened uncertainty about trade, with a lack of clarity about the direction of US President Donald Trump's trade policies.
"While the net effect of the tariffs is unclear, uncertainty breeds caution," Steel said.
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