A key barometer of manufacturing activity is pointing to contraction.

The BNZ-Business New Zealand performance of manufacturing index stood at 49.4 per cent in July, down from 50 in June and 55.9 in May.

Any reading below 50 indicates contraction. It was the weakest July for four years.

Of the five sub-indices, only new orders was in expansion territory - at 52.9 it was slightly above its average level of 52.5 over the past year.


Employment, at 47.7, was at its weakest level since October2009.

Of the industry subgroups, oil, coal and chemicals led the way at 54 after returning to expansion.

Metal product manufacturing managed to keep its head above water at 50.8, after dropping 5.1 points from June.

Business NZ's executive director for manufacturing, Catherine Beard, said the result to a large degree mirrored what was occurring overseas.

"While the current New Zealand result represents a minor fall into contraction, spare a thought for the Australian manufacturing scene - that fell significantly in July to 40.3," she said.

"Their low result is partly symptomatic of high current costs within their sector."

Globally, the JPMorgan global manufacturing PMI contracted further in July to 48.4.