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Manufacturing: Look Behind The Numbers

Look behind the numbers

The latest Canterbury Manufacturers' Association (CMA) Survey of Business Conditions completed during December 2007, shows total sales in November 2007 increased 9.8% (export sales increased by 14.5% with domestic sales increasing 6.3%) on November 2006.

The CMA survey sample this month covered NZ$425m in annualised sales, with an export content of 44%.

Net confidence decreased to -8, down from the zero result reported last month.

The current performance index (a combination of profitability and cash flow) is at 97, on par with the previous month, the change index (capacity utilisation, staff levels, orders and inventories) is also steady at 104 on the previous month's result, and the forecast index (investment, sales, profitability and staff) is at 106, up on the previous month's result of 103. Anything less than 100 indicates a contraction.

Constraints reported 8% production, 17% staff and markets 75%.

Staff numbers for September increased by just over 9.6%.

"You could look at these numbers at face value and say that life is a breeze for manufacturers, except for confidence and performance, and perhaps we should only play up the positive?. This survey is positive in many respects as both export and domestic turnover increased in November, as did staff numbers, and a strong end of year is normally the case for the manufacturing sector. However, a different picture emerges when you mix where we are now, where we are going and where we could be going, if the right support mechanisms were there", says Chief Executive John Walley.

"While turnover has increased, performance (a combination of profitability and cashflow) continues to show a contraction and only a minor improvement on the trend for the year. Whilst forecasts anticipate an expansion, they are not solid enough to have a positive impact on confidence".

"Respondents say that the pressures on the sector are still there. Increased cost of holidays and KiwiSaver has been identified this month, along with rising volume of imports and the ongoing strength of the dollar."

"There are some positive signs reflected in this survey; there are some opportunities that manufacturers are taking advantage of, such as investing in new equipment, developing new products and investment in overseas markets. However, if policy settings do not change, then we can anticipate more of what happened this year, in 2008; more manufacturing activity, skills and capability being lost offshore, simplifying exports and a growing current account deficit that will result in comparative living standards being eroded".

"The warning signs are there; when we only play to the positive, we do so at our peril."


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