Financial crisis still hurting manufacturing

Job losses in manufacturing continue to mount as Reserve Bank research shows production in the sector has not recovered from the global financial crisis.

Carter Holt Harvey has announced it will shed up to 70 jobs in Tokoroa and Rotorua, while Fletcher Building laid off all 50 staff at Dunedin-based benchtop maker The O'Brien Group last week before selling the business back to its original owners, although many have since been rehired.

Meanwhile at least 100 staff at Norske Skog's Tasman newsprint mill in Kawerau are expected to be made redundant in early January, according to the Engineering, Printing and Manufacturing Union.

The union said yesterday Carter Holt Harvey had proposed to cut 18 jobs at its Tokoroa plywood plant and close its Rotorua Profiles plant with the loss of 50 jobs, including contractors.

CHH blamed a fall in demand from export markets in Australia and a lack of new home building in New Zealand as the reason for the redundancies.

Fletcher Building said it had sold The O'Brien Group to O'Brien's Benchtops Ltd and made all 50 employees redundant as of last week.

Peter O'Brien, general manager of The O'Brien Group, said it had re-employed about 37 of those staff, and merged the business with his existing company, Otago Bench Top Specialists, which had eight staff.

"We needed to look at expanding and this opportunity came along. We'll just see how it goes really."

The industry had been tough, but the company was seeing a recovery in demand, particularly in Christchurch, he said.

Traditionally there had been an unexplained "Christmas rush" in the benchtop and joinery industry.

"We haven't seen anything like that for the last three or four years. But this year there seems to be more of one. It's a good sign."

Norske Skog said in September it would halve the mill's production in response to falling newsprint demand.

A spokesman for the company said it was "still working through the process with affected employees".

Meanwhile a report by the Reserve Bank shows production in manufacturing remains nine per cent below its pre-recession peak, despite the rest of the economy surpassing pre-recession output by the end of last year.

The bank said manufacturing activity fell sharply during the 2008-2009 recession, reaching a trough in the three months to June 30 in 2009.

It said total manufacturing activity subsequently grew quite slowly, but exported manufactured goods grew fairly quickly.

Growth in exports was due to a recovery in demand in 2009, particularly from Australia.

"Those exporting to Australia experienced the additional benefit of a relatively low and stable exchange rate, although they will still have faced competition from products originating in other countries and priced un US dollars."

However manufacturers supplying the domestic market fared worse, with local demand very weak as the recovery in the construction sector was delayed, and the strength of the kiwi dollar against the euro and United States dollar made imports more competitive, the bank said.

Sixty per cent of all output for the manufacturing sector is sold domestically, much of it to the construction sector.

"The very weak domestic construction sector over the last few years can explain much of the overall weakness in manufacturing activity."

But the outlook was more positive, with forecasters expecting a considerable increase in construction over the next few years, centred on but not limited to the Christchurch rebuild, the bank said.

Despite the sector's slow recovery, it appeared to be beating other sectors in productivity improvements.

That was because output had recovered, albeit slowly, but employment had not recovered at all.

"Labour productivity has been increasing somewhat faster in manufacturing than in the whole economy."

In the June quarter of this year, the manufacturing industry made up 13.6 per cent of New Zealand's real gross domestic product.

That share has been declining for decades, and other countries have seen the same trend, as advanced economies shift towards the production and consumption of services, the bank said.