Survey reveals slowdown in new orders growth

Unlike production, new orders are not coming off a particularly strong previous month. Photo / 123RF

Growth in new orders slowed for a third month in a row, according to the latest BNZ-BusinessNZ performance of manufacturing index.

The new orders sub-index fell to 52.2 — still showing an expansion, but down from 55.2 in the December survey and 56.9 in January last year. It was the lowest since December 2017. The overall index fell to 53.1 from 54.8 in December and 55.8 a year earlier.

BNZ senior economist Doug Steel noted the index remains "comfortably" above the 50 threshold that delineates growth from contraction. It indicates the manufacturing sector will extend its six-year expansion. He said the drop in the production sub-index from 54.9 to 51.1 may reflect a pull-back from the above-trend December reading. It was the lowest since September last year.

"A little more disconcerting is the slowdown to 52.2 in the new orders index and more so as it remains below finished stocks which remain elevated despite a pull-back from December's high.

"Unlike production, new orders are not coming off a particularly strong previous month. It raises the prospect the slowdown there may be a little more genuine, but we wouldn't want to over-interpret one month's reading, especially a holiday-laden month."

Another reason for not getting too downbeat was the "solidity" of the employment sub-index, unchanged at 52.2. That doesn't suggest manufacturers are concerned about a looming slowdown, he said.

Catherine Beard, executive director of Manufacturing New Zealand, said the result looks similar to January last year, but aspects will warrant closer watching.