Signs of gloom for factories

JAMES WEIR
Last updated 05:00 12/10/2012

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New orders for manufacturers are dropping away according to a new survey, which the Green Party says makes a mockery of Prime Minister John Key's claim there is no “crisis” in the sector.

In the second weak report on manufacturing this week, new orders are at their lowest levels since 2009 according to a Business New Zealand survey, which came on the eve of a union-hosted meeting about the alleged crisis in the sector today.

Some Wellington manufacturers say things are tough but demand is steady despite concerns about the high New Zealand dollar.

The New Zealand dollar was trading at US81.7c yesterday, down from a recent peak of almost US83.5c late last month.

Green Party Co-leader Russel Norman said the evidence of a crisis in manufacturing kept growing, making a mockery of denials.

"The over-valued New Zealand dollar is making it too hard for manufacturers to compete and the National Government is failing to act," Norman said.

Peter McKee, chief executive of Wellington timber processing and milk drying equipment maker Windsor Engineering said the company was "quite busy" and working overtime, but he remained cautious about the future.

"At best, things will stay the same," McKee said.

The company, with 75 staff, was busy on drying equipment for Fonterra's Darfield plant expansion in Canterbury, but getting other customers to invest in capital plant and equipment was not easy.

"Everyone is very cautious and not planning for expansion," he said.

The high dollar meant exporting was tough. The United States was Windsor's only real opportunity for its timber drying kilns, with signs the US housing market had bottomed out and the sector could start to invest.

McKee contrasted New Zealand's stubborn resistance to act on the high currency with the Australian Reserve Bank's recent move to cut its official cash rate because of a slowdown and a high dollar. The new Reserve Bank governor Graeme Wheeler should look to follow suit here and cut rates, McKee said.

Lower Hutt food packaging company Flight Plastic Packaging general manager Keith Smith said "demand is steady, but the market is tight and tough".

Flight, with 80 staff, was quietly confident about the future, though "conditions are very challenging at the moment".

"The price of energy is a massive concern for us," and was a key cost for the plastics business, Smith said.

Bank of New Zealand economists say talk that manufacturing is in crisis was "overblown" with recently weak figures "more turbulence than tragedy".

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The BNZ-Business New Zealand Performance of Manufacturing Index out yesterday, remained in contraction during September, at 48.2 points, under the neutral level of 50.

The index for new orders fell away again in September to 45.9 points, to its lowest level since the middle of 2009.

"This is normally a good leading indicator to a big loss of momentum. Yikes," BNZ economist Craig Ebert said.

However, he pointed out that manufacturers were reasonably positive about the future and the exports outlook has surged, which did not suggest manufacturers were dying under any export collapse, triggered by the exchange rate.

- BusinessDay.co.nz

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