New Zealand's manufacturing activity extended its run of expansion for another month in June, albeit at a slower pace, as firms reined in employment in the face of growing labour shortages.

The BusinessNZ-Bank of New Zealand performance of manufacturing index fell 2 points to a seasonally adjusted 56.2 in June, extending its run of expansionary readings above 50 in every month since October 2012. The employment sub-index dropped 5.5 points to 49.5, the first time since the sector contracted since November last year and falling from a 31-month high.

BNZ senior economist Craig Ebert said the slump in the employment reading was a "weak spot" in the monthly PMI, although it was too early to say whether it was a "genuinely negative read" given the recent high in May and the volatility in the index.

"We did also see manufacturers in the latest QSBO (New Zealand Institute of Economic Research's quarterly survey of business opinion) tone down their reports of staffing over the last three months, and expectations for the coming three months," Ebert said. "In any case, NZ manufacturers would appear to be having problems finding staff in the first place. We got this impression from the QSBO variables on difficulty in finding labour."


Government figures show manufacturing accounted for about 9.9 per cent of the employed workforce in the March quarter, with 245,300 people employed, an employer, or self-employed in the industry, down from 10.7 per cent, or 252,500 in the December period.

Today's figures show the production sub-index fell 1.5 points to a reading of 58 in June, while new orders fell 1.9 points to 58.7, which Business New Zealand manufacturing executive director Catherine Beard said showed "healthy expansion", and that the elevated levels over the past four months indicated manufacturing was "still positive and healthy".

Finished stocks slipped 0.1 of a point to 54.5 and deliveries fell 1 point to 57.2.

Activity slowed in the Northern region, falling to 54 from 63 in May, while Canterbury dropped to 50.9 from 62.6, and Otago activity declined to 54.8 from 56.4. Central was the only region to show an increase in activity, rising to 58.9 from 56.2.