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NZ manufacturing slows to weakest in 6 months

New Zealand's manufacturing activity slowed for a second month in June to the lowest level in six months, as the employment index contracted for a second straight month and the production measure fell to its lowest point since January.

The BNZ-BusinessNZ performance of manufacturing index fell to a seasonally adjusted 52.8 in June from 54.4 in May, marking the lowest level since December 2017's 51. A reading above 50 separates expanding activity from contraction. The measure outperformed in 2017, averaging 56.2, above the long-term of 53.8 going back to August 2002.

Among the sub-indices, PMI production fell to 51.8 from 53.4 in May, employment dropped to 49 from 49.6, finished stocks fell to 50.2 from 51.6, and deliveries dropped to 51.3 from 58.4. Bucking the trend, new orders climbed to 57.1 from 56.7.

"If there was a red flag in June’s PMI it was in its jobs index," Bank of New Zealand senior economist Craig Ebert said in his report. "A flat to negative result on this component is not necessarily alarming. But two in a row can start to ask some questions."

Still, Ebert noted that manufacturers had reported near extreme levels of difficulty in finding staff, whether skilled or unskilled.

"These resourcing issues need to be borne in mind when assessing the weak-looking jobs index in the PMI," he said. "A lack of hiring can reflect a paucity of decent candidates, as much as a lack of demand for staff."

Ebert said the deceleration in the PMI over the last couple of months was due to weaker production, although he noted this may not continue as the new orders measure is encouraging.

BusinessNZ executive director Catherine Beard said the proportion of positive comments in the June survey fell to 51.7 percent from 55.1 percent in May, close to February's 51.4 percent.

"Those who provided negative comments typically noted a general downturn and uncertainty in the market," she said.

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