New Zealand manufacturing expands at fastest pace in four years
The Reserve Bank of New Zealand has cut the Official Cash Rate by 325 basis points since August 2024
[WELLINGTON] New Zealand’s manufacturing industry expanded at the fastest pace in four years in December, reinforcing signs the economy is responding to lower borrowing costs.
The Performance of Manufacturing Index (PMI) rose to 56.1, its highest since December 2021, Business New Zealand and Bank of New Zealand said on Friday (Jan 16) in Wellington. The index was above 50, the dividing line between contraction and expansion, for the sixth straight month.
Increased manufacturing signals that New Zealand’s economy continued to expand in the fourth quarter after gross domestic product surged 1.1 per cent in the three months to September. The data follows reports that filled jobs hit an eight-month high in November while fourth-quarter business confidence was the highest since 2014.
“The PMI is positive for fourth-quarter GDP calculations and points to good momentum heading into the new year,” said BNZ senior economist Doug Steel. “December saw gains across all the major components to above-average levels, with production and employment now following new orders higher.”
The Reserve Bank of New Zealand has cut the Official Cash Rate by 325 basis points since August 2024 and has signalled it may have finished its easing cycle.
The resurgence in business confidence and manufacturing adds to risks of a rate hike later this year. Investors see a 57 per cent likelihood of a quarter-point increase in September, swaps data show.
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Today’s report showed the sub-index measuring new orders surged to its highest since July 2021, while the production gauge also hit a four-year high. The employment measure was the best since April.
Steel said that manufacturing is being boosted by improved fundamentals such as rising residential building activity and strong primary sector exports. The long-term average for the PMI is 52.5, he said. BLOOMBERG
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