Tentative Optimism Emerges in the Manufacturing Sector

Over the February to April period, we’ve observed encouraging signs of recovery across the manufacturing community, with emerging “green shoots” suggesting a shift from simply weathering the economic storm of the past 6 to 8 months toward a renewed desire for growth and expansion. However, this cautious optimism has yet to translate into widespread employment or significant investment in capital plant and equipment. Many businesses remain tentative, closely monitoring market signals before committing to larger-scale decisions. Feedback from industry players, including sheet metal suppliers, indicates that while interest is rising, firms are holding off on major orders as they await further certainty.

Download our Manufacturing Sector Report | QCBS Feb 2025 PDF here.

This tentative recovery is set against a backdrop of persistently weak consumer confidence and subdued demand. Inflationary pressures in New Zealand remain a concern, with many businesses facing increased input costs and needing to tightly manage production expenses. Currently, 39% of businesses report significant impacts from rising costs, which has sharpened the focus on cashflow management and efficiency. These cost pressures are also impacting productivity.

Compounding the challenge, recent events in the United States have shaken global markets. Heightened geopolitical tensions and international trade uncertainty are also playing a role, prompting many local businesses to pause or delay growth plans until the risks are better understood.

The recovery remains uneven across New Zealand, with a clear “three-speed” economy emerging:

• Group 3: businesses are thriving in their niche markets and experiencing strong demand.
• Group 2: businesses have made deep operational cuts and are cautiously optimistic, expecting improvements later in the year.
• Group 1: businesses are under significant financial strain, relying on reserves or external funding while they wait for the market to rebound.