Summary:
- New Zealand manufacturing PMI eased to 53.2 in March (from 54.8 prior)
- Sector remains in expansion but momentum is slowing
- New orders strongest component; deliveries weakest at neutral
- Negative sentiment among firms jumped sharply to 62%
- Iran war cited as a key source of uncertainty and concern
- Data suggests solid Q1 growth, but rising headwinds into quarter-end
New Zealand’s manufacturing sector continued to expand in March, although momentum softened as rising global uncertainty, particularly linked to the Iran conflict, began to weigh on business confidence.
The latest Performance of Manufacturing Index (PMI) came in at 53.2, marking a third consecutive month of expansion but down from 54.8 in February and 55.0 in January. While still comfortably above the 50 threshold that separates expansion from contraction, and above its long-term average, the trend points to a gradual loss of pace as the quarter progressed.
Beneath the headline, activity remained relatively resilient. New orders stood out as the strongest component, indicating that demand conditions have yet to materially deteriorate. Production also held at a solid level, while employment remained modestly expansionary, suggesting firms have not yet begun to materially scale back hiring.
However, signs of strain are emerging. Supplier deliveries weakened to a neutral reading, hinting at either supply-side frictions or a cooling in input demand. Meanwhile, inventories of finished goods remained elevated, which could point to softer downstream demand or a lag between production and sales.
The more concerning signal comes from business sentiment. The proportion of firms reporting negative conditions surged to 62%, up sharply from 44.5% the month prior. This shift suggests that while current activity remains positive, forward-looking confidence is deteriorating quickly.
A key driver of this uncertainty appears to be the global backdrop, with the Iran war and its broader economic consequences cited as weighing heavily on respondents. Rising energy costs, supply chain risks, and heightened geopolitical tension are likely feeding into this more cautious outlook.
Despite these headwinds, the data is consistent with a solid start to the year. The PMI aligns with expectations that economic growth was reasonably firm through the first quarter
