Unexpected Good And Bad News In Business Survey

The return to export led growth is first going to require a sustained period of rebuilding manufacturers' position in the domestic market, says the Employers & Manufacturers Association (Northern). The view is in reaction to the results from the association's latest survey of business conditions.

"The results of our survey for August are showing an unexpected turn of events," said Alasdair Thompson, EMA's chief executive.

"Exports from northern manufacturers are not growing in response to the low dollar, but sales on the domestic market are showing gains over the last two months after a period of decline.

"The survey indicated that manufacturers are finding import substitution increasingly viable as imports become more expensive, and less risky than growing their export turnover.

"Production is being switched to supply the local market. As demand in New Zealand has flattened off, and with the low dollar, we expected some production capacity to go the other way, from supplying the domestic market into exports.

"The transition to export led growth is plainly going to take longer than anticipated.

"Until manufacturers' position in the domestic market has stabilised, following the lengthy periods of attack from cheap imports, they appear reluctant to invest in new plant and equipment to supply new local and export opportunities.

"The concerns about the impact of the exchange rate on the cost of components and raw materials has reached a new high. Prices will be going up as a consequence.

"Just 38 per cent of respondents indicated they are prepared to invest in new plant and equipment, which is the lowest this figure has been for years. More respondents expect profitability to worsen than those thinking it will improve.

"Locating new skilled staff remains an issue though finding unskilled staff is less important than it has been all year.

"Capacity utilisation is modest with 68 per cent indicating they have spare capacity.

"Our survey's respondents are weighted towards those supplying the domestic market with their total combined sales exceeding at least $100 million each month."

Further comment: Alsadair Thompson tel 09 367 0911 (bus) 025 982 064

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