The Bank of New Zealand – Business New Zealand Performance of Manufacturing Index (PMI) stood at 47.0 in September, a reading below 50 for the fifth consecutive month.

This is a decline of 1.3 points from August, and the worst September value since the survey began in 2002.

Unfortunately, last month we also reported that the August PMI was the worst August value since the survey began. This now matches the worst May, June, and July recordings for the PMI since 2002.

Between 2002 and 2007, PMI values for September have ranged from 51.0 to 58.7 and have never dropped below 50.

Of the five sub-indices measured, four recorded a value below 50. Finished stock managed to just stay in positive territory at 50.2. Leading the weakening was employment with a value of 44.7. Employment has recorded values below 50 since the beginning of this year, but this is the lowest value recorded in 2008, indicating that perhaps more job losses will occur in this sector. New orders returned to levels similar to those seen in July while production improved slightly on the August result.

Declines in the industries are reflected in manufacturing job losses seen in September as well as the regional indexes. In the North Island, the Central and Northern regions remained below 50, while in the South Island Canterbury and Otago/Southland have rebounded into positive territory showing expansion for the first time in several months.

Looking ahead to the next PMI a general slowdown in other parts of the national and international economy will impact on manufacturing, particularly new orders and employment, but the exchange rate – particularly the drop in the New Zealand dollar against the US – will be positive news for some exporters.