New Zealand’s manufacturing sector made strides in April, with the Performance of Manufacturing Index (PMI) hitting 53.9. This is an increase from March’s 53.2 and marks four months of ongoing growth. The reading is also above the average PMI of 52.5. All sub-indexes showed growth during this time. The recovery in manufacturing is clear, especially from a low of 41.4 last June. However, there are worries about whether this recovery can last, given some external uncertainties.

Current Performance Overview

A PMI of 53.9 means that New Zealand’s manufacturing sector is not just stable—it is actively recovering. A PMI above 50 indicates growth, so reaching 53.9 (higher than March’s 53.2 and above the long-term average) shows this improvement isn’t temporary. It’s a more profound change. To put it in perspective, last June, the PMI was as low as 41.4, when overall demand and sentiment were weak. Since that point, we have been improving steadily. All tracked sub-indexes—employment, new orders, production, deliveries, and inventories—reported gains. These data points are significant indicators of demand strength and production capacity. Increases across all categories provide a broader picture that is hard to overlook. They suggest demand is not concentrated in just a few areas, as often happens during temporary recoveries. Yet, questions linger about whether this growth can continue into winter. The progress may come from fulfilling delayed orders and international customers rescheduling after earlier disruptions, which could indicate a trailing effect instead of new business. If that’s the case, we might see activity stabilize unless new demand emerges. From a trading perspective, the market will likely focus on whether rising input costs and output prices in this sector will affect overall inflation. If manufacturers begin to pass costs onto consumers—even slightly—that could increase pressure on central banks to maintain tighter policies for longer. This could impact rate expectations.

Future Considerations

Leitch, who contributed to the report, noted this tension, mentioning improvements across nearly all manufacturing dimensions. However, sustained improvements are crucial. Positive signs can quickly become misleading if commodity prices or external orders unexpectedly decline in the coming weeks. In this context, we should monitor changes in forward orders or inventory reductions. If manufacturers begin to report weaker future orders, it may suggest that April’s positive results are part of a temporary improvement. Domestic demand conditions are still uncertain. While export orders have driven much of the growth, household spending—especially on items requiring industrial inputs—might not be strong enough to support continued recovery. Bonds have not reacted sharply to the PMI data, indicating that the market is still assessing the reliability of this recovery. While the data is promising, significant shifts in macro positions are unlikely unless factory data shows consistent upward revisions over a second quarter. This will only happen if increased production leads to more employment and wage growth, which in turn fuels discretionary spending. In future sessions, we will keep an eye on input price indices from regional surveys for early signs of margin strain and delivery times. Changes here may signal either weak or constrained demand. A decline in these times would suggest smoother supply chain operations, possibly due to a decrease in demand. The key takeaway? Strength in manufacturing allows for more confident investments in industrial, transport, and production-related assets. But this confidence hinges on the rise of forward-looking indicators, especially new domestic orders, in upcoming reports. Without these, April’s numbers are more about recovery than growth. Create your live VT Markets account and start trading now.

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