A PMI still well above 50 gives little reason to doubt New Zealand’s recovery, so the small fall should do little to change the outlook for the RBNZ or the New Zealand dollar. The focus on fuel prices among survey respondents links New Zealand’s factory sector to the oil shock. That keeps input costs and inflation pressure in view, even as demand holds up. Election uncertainty is a near-term drag on business confidence that could weigh on investment decisions until a coalition is formed. Markets will look to Monday’s services index for a fuller read on domestic momentum.
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New Zealand’s factory expansion lost a little pace in October but held a solid footing, as Christmas demand and infrastructure work offset rising fuel costs and post-election uncertainty.
Summary:
- The seasonally adjusted PMI fell 1.4 points to 54.9 in October from 56.3 in September, a 16th straight month of expansion
- Deliveries rose to 61.4 and finished stocks were 58.0, while new orders eased to 54.3 and production to 53.9
- Employment was again the weakest sub-index at 51.9, little changed from September
- Negative comments rose to 56.4% from 53%, with fuel prices, the cost of living and election uncertainty cited
- Business South led the regions at 65.0, while Business Central fell into contraction at 49.1
- BNZ expects moderate manufacturing growth through Q4 and around 2% GDP growth for 2026
New Zealand’s manufacturing sector kept expanding in October, though more slowly than in September’s strong result. The seasonally adjusted BNZ-BusinessNZ Performance of Manufacturing Index (PMI) fell 1.4 points to 54.9 from 56.3, BusinessNZ said on Friday. A reading above 50 means the sector is expanding and below 50 that it is contracting. October was a 16th straight month above that line.
The detail was mixed but still solid. Deliveries rose to 61.4, and finished stocks were 58.0, just below September. New orders slipped to 54.3 from 56.8 and production fell to 53.9 from 56.6, but both remain well inside expansion territory. Employment was again the weakest component at 51.9, almost unchanged from September.
BusinessNZ’s director of advocacy, Catherine Beard, welcomed more than a year of unbroken expansion. She said the softening in new orders and production was worth watching. She also said the Christmas build-up and steady infrastructure work suggest manufacturers will finish the year on a solid footing, even as input costs and the cost of living weigh on many firms.
Survey comments turned a little gloomier. The share of negative comments rose to 56.4% from 53% in September. Respondents cited fuel prices, the cost of living and uncertainty following the general election. BNZ said election uncertainty is likely to linger until final results are in and coalition talks are settled.
The regional picture was uneven. Business South had the strongest reading at 65.0, ahead of Canterbury at 57.9 and the EMA’s northern region at 55.5. The Business Central region slipped into contraction at 49.1. BNZ said every manufacturing subindustry expanded in October.
The bigger picture is still positive. BNZ said the result supports its forecast of moderate manufacturing growth through the fourth quarter and annual GDP growth of around 2% in 2026. Its senior economist said that although the PMI moves around from month to month, momentum in manufacturing is firmly positive. New Zealand’s reading also compares well internationally. It matches the US and is above the global manufacturing PMI of 52.6. The services index, due on Monday, will show whether the slower pace is limited to manufacturing.
This article was written by Eamonn Sheridan at investinglive.com.