"This is a clear indicator that, despite some improvement in new orders and production from the horror lows of recent months, the recovery in activity to date has not been strong enough to stop the sector reducing staff levels overall," Steel said.
Manufacturers laying off staff was an indicator that employers lack confidence that the recovery will be sustained.
That's been highlighted again today with the news that BlueScope Steel has a strategic review underway of its NZ Steel and Pacific Steel businesses as it struggles to keep the local businesses financially viable.
And just last week, Rio Tinto pulled the pin on the Tiwai Point aluminium smelter, saying it can't afford to keep it operating in the current environment, and giving notice that it will shut down the operation in August next year.
BNZ's Steel said much of the recovery in the index had been from pent-up demand after the lockdown, and that momentum would likely persist in July. Food and beverage manufacturing - which had largely been deemed essential services and able to operate through the restricted period - had recovered the most, he said.
BusinessNZ manufacturing executive director Catherine Beard said the growth was welcome, given the difficult period experienced over the last three months.