2007 - A good first half anticipated

30 January 2007
IMMEDIATE RELEASE

2007 - A good first half anticipated

The latest Canterbury Manufacturers’ Association (CMA) Survey of Manufacturers completed during January 2007, shows total sales in December 2006 increased just over 3% (export sales up just under 10% although domestic sales decreased by just over 2%) on December 2005.

The CMA survey sample this month reported NZ$422m in annualised sales, with an export content of 47%.

Net confidence was recorded at 0, a decrease from November’s result which was 40.

The current performance index (a combination of profitability and cash flow) is at 91.5, down from the previous month’s 101, the change index (capacity utilisation, staff levels, orders and inventories) dropped to 100 from 107 on the previous month, and the forecast index (investment, sales, profitability and staff) also dropped to 102 from 108 in November 06. Anything less than 100 indicates a contraction.

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

Staff numbers for December increased to just over 2%.

“December’s survey reported positive signals for manufacturing, firms are reporting that forward orders remain strong, certainly for the first half of this year, however there are some dark clouds looming on the horizon”, says Chief Executive John Walley.

“The continued strength of the New Zealand dollar continues to hurt many exporting companies; this is the major concern as we head into the New Year. Putting long term cover in place is expensive and so often problematic given that the overwhelming balance of opinion was a weaker dollar – yesterday. Last week’s OCR statement did little to take the pressure off the Kiwi dollar and if it continues to linger around the US$.70 mark, it will further damage companies’ performance and profitability”.

“Local firms are faced with the domestic threat from low cost competition. Imports remain cheap and are still flooding into the New Zealand market, and international competition drives pressure on returns through the elevated exchange rate. In these circumstances there is next to no headroom for additional problems. This fundamental vulnerability seems to be embedded into the confidence message, we have fewer pessimists, they net out the optimists and the “not sure, so no change group” is showing all the increase.

“Members continue to express concerns on input costs - wages, holidays, electricity, freight - all have strong upward pressure. Some softening in raw material and fuel prices has helped but investment decisions are being back-burnered for fear that assets may be stranded by further appreciations of the dollar.

“Looking towards 2007, there are clouds on the horizon for manufacturers. There is still a sense of hope that there will be growth in the months ahead, however there is also concern that things could change very quickly impacting negatively on performance and profitability”.

ENDS

See... Jan 07 CMA Survey PR and Results (PDF)

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