Mike's Minute: Manufacturing is our big economic red flag

As much as we tried to celebrate last week's excellent economic numbers regarding the food and fibre, the bullishness of Fieldays, the boost in elective surgery and the boom in teacher numbers, what you can't ignore is the manufacturing read for April. It hit a brick wall. It fell over six points and is below the 50 point expansionary mark. A couple of key things about that - while services and sentiment and spending figures have been bad manufacturing, for months now, has been on the increase each and every month. It has been above 50, it has been growing. It has been a significant green shoot in the overall economic picture. The other thing is employment. That is a sub category that had its biggest reversal in the history of the index. What makes this worse? For those of you saying "oh, it will be Trump", the experts don’t think it is. So the big question is, how much of it is the world? Remember the World Bank last week reduced global growth all over the place. So how much of it is the world vs how much of it is the U.S? Has New Zealand Inc hit a tough spot? For trainspotters it was suggested fairly far and wide at the time that April and May seemed to be an issue. All the momentum that we felt we had at the start of the year had suddenly run out of puff. These numbers would tend to suggest the vibe was real. Ironically this week we get the GDP figures for Q1, that’s January, February and March, and the broad consensus is that we will have seen good growth. They think about 0.7% for the quarter. If you annualised that out it gives you a number very close to 3%, which anyone would take in this troubled and turbulent world. But we can't annualise it out, not with manufacturing numbers like this. It might be short term. It may involve the Reserve Bank and that idea they had that things were a bit neutral and therefore not needing a gee up. They may well be hopelessly wrong. Politically it’s a hole in the head the Government don’t need, because its not like they aren't pedalling fast. But when one of your major economic reads that was good, now isn't, it doesn’t take an economics degree to recognise a big, fat, red flag. LISTEN ABOVESee omnystudio.com/listener for privacy information.