Encouraging signs of a lift in manufacturing have been found in a new business survey, but lobby group Business NZ says it's too soon to say if we've turned the corner.
The country's manufacturing sector made a slight comeback in July, according to the BNZ-Business NZ Performance ofManufacturing Index (PMI), but activity levels are still contracting.
The seasonally adjusted PMI for July stood at 48.8 - 3.5 points up from June and similar to the May result.
A PMI reading above 50 indicates that manufacturing is generally expanding; below 50 that it is contracting.
Business NZ chief executive Phil O'Reilly said the part recovery in the seasonally adjusted result was encouraging, given a significant fall in June. But the sector remained soft, echoing a general downturn throughout the economy.
"At this stage, it's too early to tell whether the sector has yet turned a corner in terms of overall activity. The recent significant drop in the New Zealand dollar over the last few weeks will no doubt give exporting manufacturers a competitive advantage, which may encourage further activity in the months ahead.
Demand on the domestic front remained lacklustre and many manufacturers were finding things tough, with rising prices for key raw materials and petrol.
BNZ senior markets economist Craig Ebert said although several factors, such as the declining exchange rate, were "riding to the rescue" of New Zealand's manufacturing sector, many more existing and emerging "issues" were weighing against its immediate relief.
These included the fact local business investment was looking a bit shaky, the construction sector here and overseas was tracking weakly and consumer spending on big ticket items was drying up.
"We can't get too sanguine about manufacturing prospects, at least not for the foreseeable future," he said.
