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Good news and bad news? - Survey of Manufacturers

22 December 2005

Good news and bad news?

The latest Canterbury Manufacturers' Association (CMA) Survey of Manufacturers completed during December 2005, shows total sales in November 2005 were down more than 12% (export sales down about 22% and domestic sales down around 0.2%) on November 2004.

The CMA survey sample this month reported around NZ$385m in annualised sales, with an export content of 50%.

"The good news is the two speed economy might no longer be with us, the bad news is both may have stopped," says John Walley, Chief Executive of the CMA. "Consistent 10% falls year on year is not good news and forward forecasts anticipate much of the same."

"The good news is the NZ$ has weakened against the US$ and the AU$, the bad news is sales volumes are falling at the same time. So now things might look a little better, the question remains will it trade through."

"Again in the responses there is the odd bright patch where particular firms are doing fine but on balance things are black. Many companies are closing through to the 16th and even the 21st of January as forward orders soften, this time last year many were opening as soon as possible after the New Year statutory holidays."

"Net confidence is still bouncing along the bottom at -29 improving a little from -32 last month, history indicates this trend towards deep pessimism has been in place since May 2004."

"The month saw more closures in the furniture sector, largely precipitated by long term owners giving up under the pressure of what they see as "cheap imports" from low cost countries as anything but fair trade. The good news is that industrial demand for electricity has fallen, the bad news is the closure of the aluminium wheel plant South Auckland."

The current performance index (a combination of profitability and cash flow) stands at 95 up from 90 last month, the change index (capacity utilisation, staff levels, orders and inventories) sits at 100 up from 97 last month, the forecast index (investment, sales, profitability and staff) at 95 down from last month at 93. Anything less than 100 indicates a contraction.

"One way or another, policy settings have to restrain the violent rush and rest of the New Zealand economic cycle. We have to put aside the "candle in the wind" fatalistic attitude and determine something can be done and then find a way to do it."

"More productive investment in these conditions is either very special or crazy."

Constraints focused on staff ~7%, markets ~79%, capacity ~7% and capital ~7%.

Staff numbers indicated a fall in the month of around 10% and reports are spreading that the difficulty in finding skilled staff is easing.


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