Made in NZ (yes, still)

Photo / Supplied

Think of the recession like this: for a few years there was a huge global dance party - wild, crazy times for all. Then, abruptly, the music stopped.

In one lonely corner sat the manufacturers. Some packed up and left. Some went out of business. But those who remained are starting to hear a faraway tune.

The rave music isn't yet blaring; the song New Zealand manufacturers are singing is more one of cautious optimism.

"By and large that's what we've been picking up," says BNZ senior economist Craig Ebert. "Things are starting to move forward but they're not rip-roaring away; they're conscious of some risks going forward."

That caution is hardly surprising. "Some of the declines we saw in manufacturing and employment were just horrendous," says Ebert. "We haven't seen it like that for decades."

But there are signs of a recovery. The BNZ-BusinessNZ Performance of Manufacturing Index - which measures the health of manufacturing - has now recorded nine months of expansion.

And gross domestic product figures had manufacturing activity up 4.5 per cent in the final three months of last year - after almost two years of decline - then up another 1.6 per cent in the first three months of this year.

"In essence Q1 is still good news, but I think we were hoping for a little bit more positivity," says Ebert.

"Often after a bad recession, you suddenly get this roaring recovery phase that catches everyone by surprise, but it's already evident that that's not going to happen. Maybe over the next year or two."

Ebert puts that down to the structural problems in the economy and the debt hangover the party left. "Now the music has stopped they find [the debt] too high and really difficult to service. It's really a financial problem," he says.

"The next phase is really important - we'll learn whether it was simply a breather and people are coming back and catching up, or whether it's the start of a new trend which will build on itself."

While ongoing problems in Europe have many Kiwi manufacturers wary, Ebert says they should also keep an eye on what's happening in our main export market across the ditch, where the Australian economy has profited from China's strength.

"China is much more important for our manufacturers to keep an eye on than Europe," he says. "It has printed some really good growth figures, it has rebounded far better than anyone else but the trouble is its sources of growth look very bad quality or transitory."