(Bloomberg) -- New Zealand’s manufacturing industry contracted for a record 20th consecutive month, reinforcing signs the economy will need further stimulus to get back up to speed.
The Performance of Manufacturing Index slid to 45.8 in October from a revised 47.0 in September, Business New Zealand and Bank of New Zealand said Friday in Wellington. The index was last above 50, the dividing line between contraction and expansion, in February 2023.
The Reserve Bank is expected to lower interest rates further, helping revive growth in the final three months of the year after the economy probably contracted in the third quarter. Continued softness in manufacturing, which reflects weak demand from the construction industry, is partly offsetting a recovery in consumer spending.
“Despite lower interest rates, the manufacturing sector continues to face significant headwinds,” said BNZ Senior Economist Doug Steel. “If this PMI weakness persists, it poses some downside risk to the improvement anticipated” in the economy, he said.
The RBNZ cut in August and stepped up the pace with a 50 basis-point reduction in October. It is tipped to move another 50 points in late November, bringing the Official Cash Rate down to 4.25%.
Friday’s report showed a gauge of new orders lifted to 49 after it had fallen below 40 in June.
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