Uncertainty Dents Confidence

17 April 2001

UNCERTAINTY DENTS CONFIDENCE

“Uncertainty about future profit levels was the major factor in the deterioration of manufacturing business confidence in the March quarter ", said David Moloney, President of the New Zealand Manufacturers Federation. Mr Maloney was commenting on the latest WestpacTrust Manufacturers Business Opinion Survey.

"A net 12% of manufacturers expect the general business situation in New Zealand to deteriorate over the next six months. This is a sharp turnaround from the net 24% in December who expected the economy to improve.

"Factors contributing to this turnaround in confidence are:

- the much weaker economic outlook in export markets, particularly Australia

- expected growth in the domestic market which did not materialise

- costs continue to increase faster than price increases, which is squeezing profitability."

"A major long term concern facing the sector is the constraints facing firms attempting to expand. Firms were asked what single factor, if any, was most limiting their ability to increase turnover. Responses included:

Shortage of - capacity 14%
materials / components 8%
finance 7%
labour 4%

"With just a net 2% of manufacturers planning to increase investment, growth in the sector will be constrained until confidence improves."

"The labour market is also of concern. Continuing the trend of the past year or so, manufacturers reported it was harder to find skilled and unskilled staff. With the unemployment rate still above 5%, there is clearly a mismatch between job opportunities and labour availability. This is a key issue the Government needs to address."

ENDS

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