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Who cares?

January 2006

Who cares?

The latest Canterbury Manufacturers' Association (CMA) Survey of Manufacturers completed during January 2006, shows total sales in December 2005 were down more than 11% (export sales down about 26% and domestic sales up around 11%) on December 2004.

The CMA survey sample this month reported around NZ$511m in annualised sales with an export content of 50%.

"Falling employment and sales volumes are the end game for the pressures that have been building since late 2003," says John Walley, Chief Executive of the CMA. "Headlines are now reporting what we have been predicting for some time."

"With a bit of a bounce through January, the New Zealand dollar is slightly weakened against the US dollar and the Australian dollar, which will help, provided volumes hold up. More movement towards fair value will benefit companies but fighting back losses in offshore markets will be a challenge."

"Things are slowing across all sectors, even building has levelled. Our members reported that back in late January they had seen orders improve on what was anticipated late last year but most remain concerned."

"Net confidence remains low at -33 down from -29 last month."

"The month saw an acceleration of job losses as the OCR holds up the exchange rate as the tradable sector is used as the whipping boy for non-tradeables. Inflation is being driven by the sector that is almost immune from OCR pressure."

"Talk of hard or soft landings are meaning less at the firm level, if you make it through it is a soft landing, if you don't the landing is very, very hard!"

The current performance index (a combination of profitability and cash flow) stands at 92 down from 95 last month, the change index (capacity utilisation, staff levels, orders and inventories) down to 99 from 100 last month, the forecast index (investment, sales, profitability and staff) at 96 up from last month at 93. Anything less than 100 indicates a contraction.

"We repeat, monetary policy alone cannot redress the imbalance in the New Zealand economy. The spectacle of the tradable sector being beaten to death by the exchange rate is doing little to curb the excesses in the rest of the economy. We need to influence the parts the OCR cannot reach! Fiscal and broader government policy has a role to play - how long will they just sit on their hands."

"Japanese housewives and Belgian dentists maybe misguided but any sort of productive investment in these conditions is either very special or crazy."

Constraints focused on staff ~13%, markets ~67%, capacity ~20% and capital ~0%.

Staff numbers indicated a fall in the month of around 5%.


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