The stronger reading is mildly supportive for the New Zealand dollar, adding to evidence that the goods side of the economy is gathering pace into year-end. Firm new orders and production point to near-term resilience, while the return to growth in employment is the detail policymakers are likely to watch most closely. Fuel prices remain the main cost pressure cited by firms, so any further rise in oil prices would squeeze margins and could dent sentiment that is already more negative than the headline suggests. Election uncertainty adds a domestic risk premium to investment decisions.
Newswire cut: New Zealand’s BNZ-BusinessNZ manufacturing PMI jumped to 56.5 in September from 53.3, its 15th straight month of expansion, led by finished stocks and deliveries, as employment also returned to growth despite fuel costs and election uncertainty.
One-line wrap: New Zealand’s factories posted their strongest month since 2021 outside of June, but the firms behind the numbers sound far less cheerful than the index.
Summary:
- The seasonally adjusted PMI rose 3.2 points to 56.5 in September, above the long-run average of 52.5
- The sector has now expanded for 15 consecutive months
- Finished stocks (59.0) and deliveries (58.8) led, with production and new orders both at 57.0
- Employment was the weakest sub-index at 51.8, but returned to expansion from 50.0
- Setting aside June’s 60.1, it was the highest reading since 2021
- 53% of respondent comments were negative, citing fuel prices and election uncertainty
New Zealand’s manufacturing sector expanded at a markedly faster pace in September, with the BNZ-BusinessNZ Performance of Manufacturing Index rising to 56.5 from 53.3 in August. The seasonally adjusted reading sits well above the survey’s long-run average of 52.5. It marks a 15th consecutive month above the 50 level that separates expansion from contraction.
The improvement was broad. Finished stocks led the sub-indices at 59.0, followed by deliveries at 58.8, while production and new orders both climbed strongly to 57.0. Employment was the softest component at 51.8, but it moved back into expansion after sitting at 50.0, the no-change mark, in August.
BusinessNZ Director of Advocacy Catherine Beard welcomed the result. She pointed to the return to growth in employment as a possible sign that manufacturers are becoming more willing to hire. She said strength across new orders, production and finished stocks suggested genuine momentum heading into the final quarter, although respondents were still weighing cost of living pressures.
BNZ Senior Economist Doug Steel said that, setting aside June’s unusually strong reading of 60.1, September’s figure was the highest since 2021. He described it as an impressive outcome given the range of domestic and international headwinds facing the sector.
The upbeat headline did not translate fully into business mood. Just over half of respondents’ comments were negative, with firms continuing to cite fuel prices and uncertainty ahead of the election. Others pointed to seasonal lifts in activity, orders placed ahead of Christmas and firmer demand as reasons for optimism.
That contrast is the key caveat for readers. Strong forward-looking components such as new orders suggest activity should hold up in the near term. However, elevated fuel costs and election uncertainty could weigh on investment and hiring decisions if they persist. Part of September’s lift may also reflect seasonal and pre-Christmas ordering rather than a lasting shift in demand.
The next test will be whether October’s survey confirms the momentum, particularly in employment, which remains the weakest part of the picture.
This article was written by Eamonn Sheridan at investinglive.com.
