The construction-activity data for the third quarter to September is its seventh consecutive decline.
The data released by Statistics New Zealand yesterday runs against expectations the country's gross domestic product was to have had a "slight" boost in the period.
It is now indicating a "fractional decline", according to ASB economist Jane Turner.
"The overall condition of the economy in the third quarter was that of one continuing to track sideways, as the recovery [from recession] struggles to gain traction," Ms Turner said, when contacted yesterday.
The value of seasonally adjusted manufacturing sales for the quarter fell by $1 billion, or 5.1%, in the fourth consecutive quarterly fall, to levels last seen in early 2007.
For the year to September, annual gross domestic product was forecast by ASB to come in at -2.2%, which Ms Turner described as the "absolute bottom", but she cautioned growth thereafter would be slow and weak.
The soured manufacturing and construction data prompted ASB to revise downward its forecast on gross domestic product from +0.2% for the quarter to September to -0.1% - data which will be released later this month.
Residential building work was down 5.4% for the quarter, but the volume of work during the past two years was down almost 40% compared with the peak period of September 2007.
The seasonally adjusted volume of total building work, residential and commercial, in place for the quarter was the lowest on record since the quarter to June 2002, Ms Turner said.
She said manufacturing turned in another weak quarter, with sales volumes down overall 1.4%, stemming mainly from the meat and dairy manufacturing sector being down 7.1%.
"These declines are likely to reflect the weakness in meat exports, as slaughter levels have fallen dramatically over the past few months," she said.
Some manufacturing sectors experienced growth: wood-product manufacturing volumes were up 9.1% on the previous quarter, and basic metal manufacturing volumes were up 21.5%.
While the outlook for manufacturing was improving because of growth in Australia and signs of global stabilisation, Ms Turner cautioned the level of activity was "likely to remain subdued for some time".
Westpac chief economist Brendan O'Donovan said New Zealand manufacturers had at present "very negative profitability expectations", noting annual nominal profits for 2008-09 were no higher than in 2000-01, excluding the dairy and meat sectors, which were much more positive.
"Big opposing forces" were affecting the country's manufacturers.
The positives were in the below-average exchange rates of the kiwi against the Australian dollar, recovering global commodity prices and some economic growth, both domestic and internationally.
However, the negatives remained the high kiwi in general, strong international competition and the tail-end of the recession, which all remained as "key risks", Mr O'Donovan said in a statement earlier in the week looking at trends in the manufacturing sector.
"The dairy and meat subcomponent [of manufacturing data] has provided an outsize share of this growth, with sales up 135% versus a 30% increase in other manufacturing sales since 1999," Mr O'Donovan said of the increase in nominal sales (measured in dollar terms).
The overall picture was "less positive" when looking at real sales (measured by volume) which were at 2002-03 levels after a "particularly grim" past year because of the recession and the global financial crisis, he said.
When comparing the negative to positive factors affecting manufacturing for the next two years, the negative influences "appear to have the upper hand", judging by manufacturers' own expectations.
He expected there to be significant further profit "margin compression" for non-dairy/meat manufacturers during the year ahead, but in the shorter term, Mr O'Donovan believed forecasters had been underplaying the likely speed of the domestic recovery and a "positive surprise" could be pending.
At a glance
June quarter to September quarter. -
> Total building work in place, down 4.9%.
> Residential building work, down 5.4%.
> Commercial building work, down 4.3%.
> Manufacturing sales, down 1.4%.
> Meat and dairy, down 7.1%.
> Wood products, up 9.1%.
> Basic metals, up 21.5%.
> Machinery and equipment, down 4.4%.
Source: Statistics New Zealand
