Manufacturing activity in New Zealand expanded during October, although at a slower pace than in September, acting as a reminder that the economic recovery is unlikely to be "all strongly onwards and upwards from here," the latest BNZ Capital-Business NZ Performance of Manufacturing Index (PMI) showed. (Update 1 includes BNZ comments) The seasonally adjusted PMI was 50.6 in October, down from 51.5 in September. A PMI score above 50 represents expansion in activity, while a score below 50 represents contraction. The component of the PMI that had BNZ economists most worried was the employment component, which fell from 51.4 in September to 46.5 in October, indicating firms are still wary of the economic situation. "The stumble in October's Performance of Manufacturing Index (PMI) was a reminder not to ask too much of the recovery at this early stage," BNZ economists said."And the slippage in its employment component, back into negative territory, seemed an especially important hint that firms might not be entirely convinced of the definite pick up they propound," they said. "The general message, of course, is that it's unlikely to be all strongly onwards and upwards from here. The economic improvement we envisage still looks like being a gradual one, choppy in its composition, and not without risks of major disappointment, overall. In the meantime, we prefer to keep assessing the recovery on a step by step basis." "As always, the monthly moves in the PMI need to be treated with caution (even if already seasonally adjusted "“ as the PMI and its components are). The trend still looks positive, to be sure. But we thought it meaningful that October's PMI tempered its enthusiasm in all of its subindices, not just overall." "This, in turn, might well be the first signs of moderation in what has been, over recent months, a constant drumbeat of recovery in the various economic surveys "“ a relentless tone that has us wondering if the economic expansion we've been expecting since early this year is now looking underdone."