Market digest

NZ mfg activity shrinks for first time in 7 years

18 August, 2019 12:00 AM printer

WELLINGTON: New Zealand's manufacturing activity contracted in July for the first time since 2012, a survey showed on Friday, as new orders and employment conditions worsened.

The Bank of New Zealand-Business NZ's seasonally adjusted Performance of Manufacturing Index (PMI) was 48.2, down 2.9 points from June's downwardly revised 51.1, report agencies.

A reading above 50 indicates an expansion in activity, while anything below that threshold indicates contraction.

BNZ senior economist Craig Ebert said while July's PMI did not confirm the wider economy was contracting the decline was "certainly something to take note of".

The New Zealand dollar dropped 0.2 per cent to $0.6437 after the PMI release.

Concerns have been mounting over slowing growth in New Zealand, as the economy faces headwinds from the US-China trade tensions and fears of a global recession.

New Zealand's central bank stunned markets last week with a steep 50 basis-point cut to the official cash rate (OCR) and flagged the risk of negative rates to fight slowing growth.

Reserve Bank of New Zealand (RBNZ) governor Adrian Orr said on Friday that weak inflation and employment expectations, not current conditions, were the main reason for interest rate cuts.