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Manufacturers Survey: Selling More, Feeling Worse

4 April 2005
IMMEDIATE RELEASE
Selling more, feeling worse

The latest Canterbury Manufacturers’ Association Survey of Manufacturers completed during March 2005, shows total sales in February 2005 were up about 18%, and domestic sales increased nearly 16% and export sales increased by over 20% on February 2004.

The Canterbury Manufacturers’ Association survey sample this month reported close on NZ$580m in annualised sales, with a 47% export content. The result is a good reflection of the health and performance of the manufacturing sector.

“Sales were certainly up on last year, both export and domestic, on the other hand sentiment recorded the biggest monthly drop and is more negative than we have seen for some time.” said John Walley, Chief Executive of the Canterbury Manufacturers’ Association. “Sentiment for exporters has been driven down by the recent all time highs on the New Zealand dollar. Hanging might be more appropriate that hanging in there at the moment.”

“Returns on export sales are thin to non-existent. The chronic pain is moving into terminal stages for some exporters – painful exchange rates, the demonstration of increasing industrial unrest and concern that preferential trade agreements have scant regard for the concerns of manufacturers all make things feel pretty gloomy.”

“Consolidation, off-shoring, rationalisation, “free” trade, all-time-high exchange rates, housing booms, all add up to a loss of export earnings and increasing current account deficits indicate a economic trajectory to what? Certainly not towards prosperity.”

“We repeat, that manufacturing is globally mobile, if it is to develop and grow in New Zealand, New Zealand needs policies that support the sector. The very mobility of manufacturing requires a policy response more than sectors based on grass, sun and snow.”

“Without an appropriate policy frame work, for example Research and Development support and favourable depreciation rules on productive plant and equipment, the list of quality job losses to New Zealand will continue to grow.”

“Each job at the top level of manufacturing probably represents five jobs in the supply chain, and worse, these companies support process capability. If these skills are lost then the remaining manufacturers see a higher cost and lower capability in their supply channels. We expect to see some of these cascade failures in the future; it will not be a linear process of decline.”

“Staff numbers reported over a 6% increase in the month but trends continue to indicate a reduction in the numbers employed.”

“Generally our net leading indicators continued on the downward trend seen since the middle of 2004.”

Net confidence ran out at -13, down from +14 last month. Around 71% of respondents indicated market conditions as the major constraint; finding staff a problem for 12%, with capacity the key issue for 18%.

CANTERBURY MANUFACTURERS' ASSOCIATION
Survey of Business Conditions – February 2004 compared with February 2005

SAMPLE SIZE: The Survey respondents represent elaborate transformed manufacturers with annual sales of approximately $578 million.

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages)
Feb Jan
TOTAL TURNOVER: Export /Domestic ratio 47/53 42/58
% Change in Total Turnover INCREASED 18.08 2.2

DOMESTIC TURNOVER: % of respondents reporting a rise 80 47
% of respondents reporting a fall 20 42
% of respondents reporting no change 0 9
% Change in Ave Domestic Turnover INCREASED 15.98 3.81

EXPORT TURNOVER: % of exporters reporting a rise 60 42
% of exporters reporting a fall 40 50
% of exporters reporting no change 0 7
% Change in Average Export Turnover INCREASED 20.54 0.15

STAFF NUMBERS: % of respondents reporting a rise 70.5 28
% of respondents reporting a fall 11.7 38
% of respondents reporting no change 17.6 33
% Change in Average Staff Numbers INCREASED 6.23 -4.02

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages. Last month in brackets.)

Large Fall
(Over 15%) Modest Fall
(2.5%-15%) No Change
(Within 2.5%) Modest Rise
(2.5%-15%) Large Rise
(Over 15%)
Feb Jan Feb Jan Feb Jan Feb Jan Feb Jan
Profitability (YoY) 19 23 13 23 13 14 44 14 13 27
Cashflow (YoY) 19 5 25 14 25 36 25 18 6 27
Exchange Rate (YoY) 27 10 20 33 33 29 20 24 0 5
Investment Forecast 24 14 12 9 24 50 41 23 0 5
Sales Forecast 18 5 18 18 18 23 47 50 0 5
Profit Forecast 24 9 12 14 12 27 53 45 0 5
Staffing Forecast 12 5 18 18 41 36 29 41 0 0
Confidence Very
Negative Negative Neutral Positive Very
Positive
19 9 19 23 38 23 19 36 6 9
Constraint Production Skilled Staff Capital Market
18 10 12 29 0 0 71 62

Net Confidence Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2003 +24 +21 +12 -11 -5 +12 -6 0 +11 +40 +29 +33
2004 +5 +19 +41 +41 +36 +50 +12 +20 +7 0 -7 +5
2005 +14 -13
ENDS

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