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Tomorrow Might Be Better

3 July 2006

Tomorrow Might Be Better

The latest Canterbury Manufacturers’ Association (CMA) Survey of Manufacturers completed during June 2006, shows total sales in May 2006 increased over 7% (export sales down just under 2% and domestic sales increased 21%) on May 2005.

The CMA survey sample this month reported NZ$510m in annualised sales, with a 56% export content.

Net confidence dropped to -42 from -29 last month this is the lowest for some considerable time.

The current performance index (a combination of profitability and cash flow) remains at 95 up from 94 last month, the change index (capacity utilisation, staff levels, orders and inventories) remained at 98, the forecast index (investment, sales, profitability and staff) dropped at 98. Anything less than 100 indicates a contraction.

Constraints focused only on markets (92%) and skilled staff (8%).

Staff numbers continued to fall at just over 12% a trend that has been in place since May 05.

“The results of this latest survey send mixed messages” said Chief Executive John Walley. “Confidence has taken a bit of knock but it is worth remembering at the time the survey was open, the Government reported “record current account and trade balance deficits” that occurred alongside the ongoing issues in the electricity system. It is hard to be optimistic at such times.”

“Returns are improving on export sales but sales are still falling. A declining exchange rate is only part of the story as it takes time to recover lost markets.”

“There are companies who have already decided to relocate offshore to take advantage of lower production costs rather than wait any longer for favourable trading conditions to return to New Zealand.”

“Sales growth is heavily weighted towards the domestic market, probably driven by infrastructure development. The loss of export sales is slowing and there are signs of growth on the horizon, but for many it remains a case of not counting their chickens before they hatch.”

“The fall in the dollar, supply competition and some speculation is pushing the up the cost of raw materials, there are significant costs increases working through supply chains.”

“On the strong plus side, some people operating supply chains into low cost countries are re-examining the wisdom of that strategy. With the dollar around US62c as opposed to US74c, domestic suppliers seem to become competitive when the full cost of purchasing is considered by supply chain operators.”

“For some there is a cautious optimism about the future, they might feel troubled today but hopefully tomorrow will be better.”

ENDS

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