Manufacturing growth helps pick up the slack

Manufacturing growth helps pick up the slack - 17 December

Gross Domestic Product (GDP) figures released today by Statistics New Zealand showed growth in the manufacturing sector of 2.8% on the previous quarter. The manufacturing sector is showing some strength and helping to pick up some of the economic slack caused by the fall in dairy prices and lower construction activity, says the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive Dieter Adam says, “This is yet another encouraging result, following up the growth seen in the last Economic Survey of Manufacturing. The increase was led by food, beverage and tobacco manufacturing, seeing an increase of 4.7% on the previous quarter. But they are not alone, transport equipment, machinery, and equipment manufacturing grew 3.3%, and petroleum, chemical, polymer and rubber product manufacturing increased 2.7%."

“While New Zealand excels at primary and processed primary production, our other manufacturers still have the potential and ability to lead growth. These other sub-sectors also bring other flow-on benefits, such as innovation, complexity and capability that fuels future growth and skilled employment. With the right support and focus, I have no doubt they can bring even more to our economy.

“There was also a positive indication that investment is increasing, with plant, machinery, and equipment investment rising 6.1%. This increase is in line with comments we have been receiving, with some manufacturers being able to invest in their businesses in the form of productive goods and technology. After a period of tougher times and margin pressure from an overvalued currency making reinvestment challenging, it is great to see this make some ground.

“However, there is some concern that both the recent cut in the OCR by the Reserve Bank of New Zealand, and the increase in the US Federal Reserve rate today did not spur our currency downward further as expected. A resumption of the trend back down towards 60c against the US$ would be beneficial for manufacturers - any development in the opposite direction has a real impact on our manufacturers ability to invest in the future.

“In manufacturing, investment is paramount to staying globally competitive, and the pace of change in technology and customer demands is increasing. There are ways this can be supported and encouraged, such as a policy of accelerated depreciation for productive plant equipment and machinery.” said Dieter.

ends

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