KEY POINTS:
The global economic crisis is hitting manufacturing sales and confidence in the sector is low, says the New Zealand Manufacturers and Exporters Association.
The association's latest survey recorded total sales in October down 2.7 per cent on the previous year.
Domestic sales dropped 13.1 per cent and exports rose 7.9 per cent, based on a sample of $460 million in annualised sales.
Association chief executive John Walley said a low confidence rating in
September had transferred into lower sales in October.
"The overall drop in sales reflects the global credit crisis, and with few forward orders, confidence has remained low," Walley said.
The survey found net pessimism of 82 per cent in October, compared with 90 per cent the previous month.
Soft domestic sales and reduced export growth were cancelling out the benefit of the lower dollar for exporters, he said.
The performance index - a combination of profitability and cash flow -
was 88.5, down from 92.5 the previous month, with anything less than 100
indicating a contraction.
The major concern was predictions for future investment, profitability,
turnover and staff trending downwards, making an export led recovery
tenuous, Walley said.
"This can largely be attributed to the uncertainty in global markets and the volatility of the exchange rate."
Some exporters reported difficult market conditions, while others found sales holding up with a lower dollar helping improve returns.
"It is a positive sign that manufacturers and exporters are still hiring
staff, in contrast with other sectors of the economy."
Staff numbers were up 11.7 per cent compared with the previous year.
Exporters were keen to maintain capacity in case markets improved and they could take advantage of the low dollar, while a lower exchange rate could see manufacturing brought back to New Zealand, he said.
"To begin with, it'll be material that's currently sourced in China that can
be made in New Zealand,
will be made in New
Zealand," Walley said.
"Then you'll see people
who might decide that
doing it in China's rather
too difficult and they might
start bringing operations
back, that'll be a second
phase.
"That'll be two or three
years out and it will also
depend on what happens to
the overall policy settings."
During the next five to
seven years, a means of
controlling inflation had to
be found other than using
interest rates, Walley said.
"Hopefully, the new
Government will revise
their ideas on the R&D tax
credit and other policies
that can better support their
stated growth objectives for
exports, even in the face of
the problems in the world."
