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Confidence Falls towards Depression


26 July 2002 Available for immediate use

Confidence Falls towards Depression

Confidence seems to have evaporated; the results from our survey of Canterbury manufacturers completed in JULY threw up net negative confidence with a fall to -36 from zero last month and + 29 in our MAY survey. “Confidence has fallen through the floor, it’s much worse than we anticipated,” said John Walley, CEO of the Canterbury Manufacturers' Association. Net confidence dropped to -36. “This continues the trend over the past three months which indicates the issues are deeper than election uncertainty,” said Mr Walley. “Cross rates on the Australian dollar have a significant impact on local manufactures and the traditional stability of the Australia cross means that forward cover is generally not extensive and the result is that losses have an immediate impact. Something approaching depression is evident,” commented John Walley.

Year on year to the end of JUNE overall sales on last year fell around 19%, domestic sales by around 25% with exports down some 10.5%.

Staff numbers have also decreased by around 5% on the same period last year. In the survey completed in JULY all our future indicators – staff, investment, profitability, sales - improved a little from last month but are still in neutral trend territory. "The lack of confidence seems to be driven from higher exchange rates (particularly on the Australian cross) and the end of investment in the primary sector in the South Island where current development schemes are largely completed and falls are predicted in next year’s dairy payout," said John Walley.

Only two constraints showed again, market conditions around 90% and staff around 10%. No capital or capacity constraints were identified.

“The continued strength of the NZ Dollar, coupled with local cost changes and increasing concerns of the loss of Port Lyttleton as a large ship hub are cited as factors. The last OCR review gave a another push to the Australian cross which has taken a toll on Canterbury manufacturers,” commented John Walley.

It seems the dream run is over and the economy is running out of steam on Election Day. The new government will have to grapple with economic transformation, this time for real and not see the economy as something we deal with in the lunch hour. We see five points in this regard:

- Tax incentives to drive more research and development

- Accelerated depreciation on capital plant, tooling and patents

- No tax on retained earnings for small and medium sized enterprises

- Incentives to increase training and staff develop in small and medium enterprises

- Clear the red tape from small to medium enterprise.

The job starts, Monday.

For further information, contact: John Walley, Chief Executive,
Phone: Mobile: 021 809 631

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