Things are not going well in the recession-hit manufacturing industry of New Zealand as manufacturing further declined last month, apparently due to low demand across key economic segments. The industry is striving to clear inventory level at a time when the economy has started showing signs of recovery.

A monthly survey by BNZ Capital and Business NZ has shown 0.9 points decline to 48.7 in Performance of Manufacturing Index for August, given to contraction in demand. The performance of manufacturing index (PMI) below 50 indicates sluggish demand in the system.

The government has also admitted in its recently released data that manufacturing declined 2.8 percent in the second quarter. Craig Ebert, economist at BNZ, said: "We don't believe it spoils the recovery theme we've been promoting. (PMI) does sound a cautionary note not to get overly excited about a strong or sustained recovery just yet."

Production declined to 48.8 in August, while employment opportunities reported the highest growth since May 2008, at 46.9. Similarly, raw material deliveries and finished stocks surged to 48 and 48.7 respectively.