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Manufacturing Growth Sustained

Economic Survey of Manufacturing: March 2000 quarter

Manufacturing Growth Sustained by Recovery in Agricultural Sector

Manufacturing sales rose by 2.0 per cent in the March 2000 quarter after seasonal variations were removed, according to Statistics New Zealand's latest Quarterly Manufacturing Survey.

However, if the effect of price increases is removed, the overall volume of sales increased by 0.6 per cent.

Over half the increase in sales came from meat and dairy product manufacturing which recorded seasonally adjusted sales of $3,013 million. This is 5.1 per cent higher than the December 1999 quarter and exceeds the previous highest quarterly total of $2,915 million achieved in March 1996. After adjusting for inflation, sales increased by 3.8 per cent. Sales of meat and dairy manufactured products fell sharply between September 1998 and June 1999 due to falling world prices and the effects of successive droughts, which reduced livestock availability. However, the current season, which commenced in September 1999, has benefited from favourable climatic conditions, stronger overseas markets and a lower New Zealand dollar.

If meat and dairy processing industries are excluded, sales volumes for the remaining manufacturing industries are estimated to have fallen 0.2 per cent over the quarter.

The upturn in sales, which began in the June 1999 quarter, coincides with a depreciation of the New Zealand dollar. The Trade Weighted Index (TWI) which measures the relative exchange rates of New Zealand's major trading partners was 10.3 per cent lower in March 2000 than in May 1999. The lower New Zealand dollar has both increased the returns to New Zealand exporters and the cost of imported intermediate goods which feed into domestic production. The price of manufacturing inputs, as reported in the Producers Price Index, were on average 1.3 per cent higher in the March 2000 quarter.

Ian Ewing

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