KEY POINTS:
Further signs that economic conditions are hurting business are revealed in new survey results out today.
Business NZ's monthly performance of manufacturing index (PMI) remains only barely expansionary, with a seasonally adjusted reading of 50.4 for June having slumped by 5.2 points from the month before.
A PMI reading below 50 indicates that manufacturing is generally declining.
The June figure is the lowest recorded by the survey since January last year, and the lowest result for a June month since the survey began in 2002.
Business NZ chief executive Phil O'Reilly said the ongoing high New Zealand dollar, rising interest rates and cost pressures were now playing a much more significant role in curbing manufacturing activity, with no real signs that relief was imminent.
"If current trends continue, a period of contraction in a sector that employs close to 300,000 workers is a distinct possibility," he said.
The Business NZ survey result comes just a few days after the New Zealand Institute of Economic Research (NZIER) reported business confidence fell to a one-year low in the second quarter.
A net 37 per cent of firms in the NZIER survey expected general business conditions to deteriorate in the next six months, against the previous quarter's net 15 per cent.
Today's Business NZ survey also showed falls across the five activity areas the data is broken down into -- three moving from expansion to contraction.
Lowest reading was for the production index, with a seasonally adjusted 47.2, down from 55.2 a month earlier and the lowest it has been since November 2005. The employment index was at 47.3 and deliveries at 49.6.
While new orders at 54.5 displayed a relatively healthy result, it was still below the average value of 56.9 over the history of the survey, Business NZ said.
Unadjusted activity in June showed mixed results in all the regions.
Canterbury/Westland, on 56.2, was the only one to show expansion in June, while the Central region, on 50 was unchanged. The remaining regions displayed minor contraction in activity.
The proportion of negative comments stood at 65 per cent in June, little changed from the 64 per cent recorded in May.
Overall, about 44 per cent of manufacturers who provided negative comments mentioned the current exchange rate. Other negative comments related to interest rates, lack of orders and seasonal and weather effects.
Many of the positive comments involved increased orders, some from offshore, and internal reorganisation within various firms.
- NZPA
