KEY POINTS:
The manufacturing sector continued to weaken in May as difficult economic conditions persist.
The latest Bank of New Zealand-Business NZ Performance of Manufacturing Index showed the seasonally adjusted May score stood at 49.3 - 2.2 points down from April. However, it was higher than March's 48.5 reading.
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reading above 50 indicates an expansion while a figure below 50 shows a decline.
The slight contraction recorded in May takes the average PMI value for 2008 to date to 50.9 - well below the average PMI of 54.3. May's values are also the lowest recorded for the month since the survey began in 2002.
Business NZ chief executive Phil O'Reilly said the reversal to a sub-50 result was an indication of the tough times manufacturers are facing at the moment.
"There are still groups of manufacturers who are experiencing positive outcomes from the current economic situation, acquiring new customers here and offshore, and businesses. However, three-quarters of manufacturers are working through issues involving a global slowdown, a high New Zealand dollar and a flat domestic market.
"Although this offers little comfort, the global PMI shows that New Zealand manufacturers are not alone in dealing with these difficult times."
O'Reilly said the ongoing drop in the Northern region was a primary concern, given the high proportion of manufacturing in that part of New Zealand.
Unadjusted results show three consecutive sub-50 values for the first time since the survey began. The region's May PMI value of 44.1 is its fifth consecutive decline, and its lowest level since January 2006.
Almost all industries were in decline as unadjusted results show. The machinery and equipment sector (50.9) bucked the trend with its third straight expansion, but the metal product sector (48.1) showed the strongest level of decline, followed by the food, beverage and tobacco sector (48.7).
BNZ senior markets economist Craig Ebert said the forestry sector was also hurting badly.
"While it's still waiting for global commodity boom benefits, it is surely looking as poorly as any sector right now, including the more widely noted, and severely squeezed, household sector."
The wood and paper product sectors recorded a PMI value of 37.8 - the second-worst on record, and deep into the contraction zone.
It was not a major surprise, said Ebert, with the industry facing a multitude of headwinds including the downturn in construction and rising costs. "It looks as though we're in for a period of pruning."
MANUFACTURING BLUES
* The seasonally adjusted PMI for May stood at 49.3 - 2.2 points down from April.
* The result is well below the average PMI value of 54.3 since the survey began in 2002, and is the lowest May result to date.
* Almost all industries were in decline during May, with the exception of machinery and equipment (50.9).
* A reading above 50 indicates an expansion while a figure below 50 shows a decline.