New Zealand's manufacturing sector returned to contraction on the back of another nationwide lockdown, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for August was 40.1 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).  This was 22.1 points lower than July, and similar to the result recorded in May 2020.

BusinessNZ's executive director for manufacturing Catherine Beard said that the August value came as no surprise given what we had seen during the previous national lockdown.  

"Employment (54.5) managed to keep its head above water, but all other sub-index values were in contraction with Production (27.7) the hardest hit.  Although manufacturers outside of Auckland have returned to alert levels that allow business operations to restart, any moves towards the sector getting back into expansion will ultimately depend on how soon Auckland can also return to lower alert levels."

BNZ Senior Economist, Doug Steel stated that “while many anticipate a bounce in activity as the country progresses down alert levels (all going well on the Covid front), today’s PMI clearly demonstrates the economic pain being felt.  This should not be underestimated, even if there is hope for the future. GDP and manufacturing output are expected to fall heavily in Q3.  It is something of a reality check in the afterglow of yesterday’s very strong Q2 GDP outcome."

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