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Here we go again

28 February 2006

Here we go again

The latest Canterbury Manufacturers' Association (CMA) Survey of Manufacturers completed during February 2006, shows total sales in January 2006 were down more than 5% (export sales down 17.5% and domestic sales up around 6.5%) on January 2005.

The CMA survey sample this month reported around NZ$337m in annualised sales with an export content of 42%.

"Closures, falling sales and pessimism were strong elements of the January 06 survey, the pressure is sustained and becoming increasingly harder to live with," says John Walley, Chief Executive of the CMA, "that said, for some the New Year started with some unexpectedly positive order increases and a bit of a confidence boosting drop in the exchange rate."

"It could be that the exchange rate "up cycle" is past. We hope that is a real start to the 'down cycle' in the exchange rate. If New Zealand is to develop an effective tradable sector, policy settings, both fiscal and monetary, need better balance before we do this all over again. Is there any sanity in doing the same things and hoping for different results?"

"The drop in the New Zealand dollar is too soon to feed through into the results but it can take away some of the pressure. The roll off through February did not show in the numbers but did show in some of the comments."

"The exchange rate move and the stronger that expected order books has helped, if only in the comments made by our members. If the Australian dollar stays under $NZ0.89 we expect confidence will start to improve."

"When we see accountancy firms offering specific "closure" advice to manufacturers, after all closure is not something that is done every day, that really says something on the state of play in that part of the economy."

"Talking to some of those who have "chosen" closure they point at government policy, open borders, exchange rates sinking them faster than they could improve their ability to swim."

Net confidence remains low at -47 down from -33 last month, about as bad as it gets.

"Headline closures and job losses have slowed, the loss right now is more subtle, a few here and a few there as work evaporates - a cumulative 20% loss year on year."

The current performance index (a combination of profitability and cash flow) stands at 98 up from 92 last month, the change index (capacity utilisation, staff levels, orders and inventories) down to 95 from 99 last month, the forecast index (investment, sales, profitability and staff) at 95 down from last month at 96. Anything less than 100 indicates a contraction.

Constraints focused on markets ~87% and capacity ~13%.

Staff numbers indicated a fall in the month of around 9.5%.


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