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Going well, but not here

3 July 2007

Going well, but not here

The latest Canterbury Manufacturers’ Association (CMA) Survey of Manufacturers completed during June 2007, shows total sales in May 2007 increased just over 19.5% (export sales increased almost 21% with domestic sales increasing by just over 18%) on May 2006.

The CMA survey sample this month reported NZ$513m in annualised sales, with an export content of 40%.

Net confidence was recorded at 8, down from 25 last month.

The current performance index (a combination of profitability and cash flow) is at 96, up from the previous month’s 95, the change index (capacity utilisation, staff levels, orders and inventories) increased to 103 from 99 on the previous month, and the forecast index (investment, sales, profitability and staff) dropped to 102 from 105 recorded in April. Anything less than 100 indicates a contraction.

Constraints reported 15% production, 15% staff and markets 69%.

Staff numbers for January increased to 4.6%.

“This survey indicates that things are going well for some manufacturers who report strong revenue numbers. However, there is no escaping the impact of the exchange rates on margins and profitability. Although sales have increased, the rampant kiwi dollar is eating away at returns at one end, with some significant cost increases chipping away at the other. It is a case of margin, what margin?” says Chief Executive John Walley.

“As nearly always, there is better news for those in the building sector, those with a domestic focus, or those who trade in Australian dollars. However, with the NZD pushing above AUS.0.90 barrier, the concern is that one of those three may have turned for the worse”.

The majority of manufacturers in New Zealand do not sell to consumers, they are largely links in supply chains and they are reporting slow and difficult payments. This is a clear indication that things are getting worse”.

“It is worth noting one issue cropping up in our survey is that it appears increasingly difficult to attract research and development (R&D) into New Zealand. Local companies have well-established relationships with offshore partners that have been willing to invest in R&D, yet these partners are finding it difficult to justify R&D in New Zealand. Better conditions exist elsewhere in the developed world and the NZD bubble expands at the cost of losing future opportunities in New Zealand”.

“All up, we are struggling to win with the R&D and compete with production costs. Where is the future for the economy? Generally, work is becoming piecemeal or project based, and it is increasingly hard to justify new projects or start New Zealand based development”.

“Even those with the heart to “do it at home” are finding that their head says “do it somewhere else”.

“Perhaps it is a case of doing well but not here”.


Survey results (PDF)

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