A Mixed Year For Manufacturers
“The latest WestpacTrust Quarterly Analysis of Manufacturing for the June 2000 quarter shows that the year to June has been a mixed one for New Zealand manufacturers,” said Simon Carlaw, Chief Executive of the New Zealand Manufacturers Federation.
“The first two quarters showed strong domestic growth from the impacts of earlier interest rate reductions and strong construction sector activity. A number of factors including strong import growth, rising oil prices, tax increases and interest rises have now seen this fall away in the last two quarters. Stronger export growth was not able to fully compensate for this, despite the total dollar value of exports increasing by a staggering 28.6% over the June quarter. This has resulted in a slowing of the overall rate of growth, although it was still up a healthy 7.5% over the previous June year.
One of the positive trends has been a consistent growth in profits over the year, the highest level of growth since June 1995. Another major factor was a 5.1% improvement in productivity, with hours worked increasing by a modest 1.5% over the same period. While the impact of the car industry closures has finally disappeared from the figures, current cost pressures from a weak exchange rate will see strong productivity growth continuing over the next 12 months. This is likely to result in a very weak labour market in the manufacturing sector in the immediate future.
Another positive sign has been a strengthening in non-commodity based exports which grew in real terms by 9.6% in the June quarter.
While investment remains above depreciation levels, it is possible that this may again weaken over the next six months given the lack of business confidence the sector is currently displaying. One sector which has, however, shown strong investment is Wood Processing, suggesting an increase in wood processing capacity.
The signs are that manufacturing growth will continue to slow in the September Quarterly. The next WestpacTrust Survey of Business Confidence in the manufacturing sector, which is due out on 17 October, should provide a better steer on the level of activity in the September quarter and the outlook for the December quarter.
Simon Carlaw: telephone 04 473-3000 (bus) 04 476 7729 (pvt)
Peter Crawford: telephone 04 473 3000 (bus) 04 389 8945 (pvt)
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ANALYSIS IS AVAILABLE ON MANFED’S WEB-SITE