The Statistics New Zealand manufacturing data released yesterday further reflects eroding business confidence and general downturn in the economy coming from a variety of recent data.
Last week, the BNZ-Business New Zealand performance in manufacturing index showed a second-worst record for the wood and paper sector, deep into contraction, largely on declining domestic activity and less robust commercial sector.
Also yesterday, BNZ-Business New Zealand released its separate performance of services index, showing activity had lifted slightly in the last month but remained in a "weak state", Business New Zealand chief executive Phil O'Reilly said in a statement.
"Last Friday's retail figures confirmed in our minds that underlying activity is not just moderating, but going backwards at an increasing rate of knots.
"The performance of services index would seem to back this up, with its retail trade and hospitality categories clearly remaining the weakest links," he said.
Yesterday's Statistics New Zealand quarterly data, with the dairy and meat sector taken from the equation, shows manufacturing volumes would have decreased 1.4%.
While seasonally adjusted manufacturing sales were up 3.7% for the quarter, the low increase in manufacturing volume revealed further signs of economic contraction.
Westpac senior economist Doug Steel said the data reflected the increasing pressure on the manufacturing sector and evidence the New Zealand economy was in recession, noting that not until GDP figures were released in September could the economy be formally in recession - two consecutive quarters of negative growth.
The combination of weakening US and world economies and the high New Zealand dollar were the compounding problems affecting manufacturing, he said.
The data does not take in account manufacturing costs, which are also rising, especially in fuel, electricity and wages, with the latter up 5.9% on the same period last year.
The meat and dairy product manufacturing industry seasonally adjusted sales volumes rose 5%, or $181 million, during the March 2008 quarter, but offsetting this were decreases in wood product manufacturing, down 4.7% ($48 million), furniture and other manufacturing down 11% ($46 million), and transport equipment manufacturing, which fell 6.3% ($36 million).
Mr Steel forecast the second-quarter figures would see "more of the same", with volume figures in the negative and sales possibly still positive, but again supported by the dairy sector its high commodity prices.
In the service sector index, four of the sub-sectors showed decline.
Activity/sales had a second consecutive monthly contraction, employment a third consecutive decline, stocks/inventories and supplier deliveries contracted, with only orders/business showing some expansion, but still well below the average result.
BNZ chief economist Craig Ebert said last Friday's data revealing a decline in retail volumes was backed up by yesterday's service sector index.
