The rain came!

2 May 2006

IMMEDIATE RELEASE

The rain came!

The latest Canterbury Manufacturers' Association (CMA) Survey of Manufacturers completed during April 2006, shows total sales in March 2006 were up just under 3% (export sales down about 11% and domestic sales up about 22%) on March 2005.

The CMA survey sample this month reported around NZ$587m in annualised sales with a 50% export content.

"The New Zealand dollar has bounced back against the US, but the Euro and particularly the Australian dollar are into the comfort zone for most manufacturers," says John Walley, Chief Executive of the CMA, "Australia is a key market for many, so that cross rate is very important."

"Although it did not show in the confidence numbers, the comments are much more positive than we have seen for a while. Intentions to increase prices, to recover some of the margin lost to past cost increases, are coming through strongly."

"There is a lot of upward price pressure out there and a feeling that customers are anticipating price increases. Raw material, steel, aluminium, copper and petrochemicals are in high demand (China again), creating an environment that will tolerate price rises. Some are gearing selling price to an appropriate raw material index, an indication that margin pressures have to be relieved."

"The costs of electricity gave rise to some comment from members. Spot prices trending away from long run averages indicate severe supply shortages. The answer should be better than "pray for rain" but sadly it is not. Rain later in the month relieved this pressure - for now, just like a lower dollar has taken the pressure off some - for now. On such issues there has to be a better way - does the will exist to find it?"

"The month of April was disrupted with Easter and other holidays. To some extent this had a negative impact on the confidence turnout, and will probably hit sales in the April month."

Net confidence dropped to -23 from -13 last month, probably off the back of the arrested dollar free fall and concerns during the month on electricity cost and supply.

The current performance index (a combination of profitability and cash flow) remains at 99 on par with last month, the change index (capacity utilisation, staff levels, orders and inventories) up to 98 from 97 last month, the forecast index (investment, sales, profitability and staff) up to 99 from 95 last month. Anything less than 100 indicates a contraction.

Constraints focused only on markets and staff numbers continued to fall at nearly 12%.

ENDS

See... http://img.scoop.co.nz/media/pdfs/0605/Mar_06_Media.pdf

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