NEW ZEALAND: Business NZ Indices Signal Prolonged Activity Contraction

The RBNZ began its easing cycle in August driven by the deterioration in high frequency indicators. It included a box on these variables in the accompanying Monetary Policy Statement with charts of the performance of manufacturing and services indices as they showed that activity was contracting. Both those indices remained under the breakeven-50 level in October where they have essentially been through 2024. Thus the RBNZ is likely to again cut rates 50bp at its November 27 meeting.

• The October Business NZ performance of services index (PSI) improved to 46.0 from 45.7 thus signalling that activity continued to contract but at a slower pace. The outlook improved though with new orders higher. However, employment and sales continued to fall.
• The share of negative comments remained around 59% with the pessimism driven by the soft economic climate and cost-of-living issues.
• The Business NZ manufacturing PMI has signalled contracting activity in the sector since March 2023. It had been improving since June 2024 but deteriorated again in October falling to 45.8 from 47.0. The downward move was driven by production (-3.4 points) and employment (-1pt) and deliveries (-1pt).
• There was some good news for manufacturing though with new orders up 1.1 points to 49, close to the breakeven-50 mark and the highest since May 2023. Also BNZ reported a 10pp drop in negative comments to 53.5%.
• The ANZ business survey paints a more positive picture than the PSI and PMI.

NZ Business NZ PMI vs PSI