KEY POINTS:
A new survey is showing a strong increase in manufacturing sales, but high exchange rates are said to be hitting margins and profitability.
The Canterbury Manufacturers' Association (CMA) said its latest survey of manufacturers showed total sales in May increased just over 19.5 per cent on May 2006.
Export sales increased almost 21 per cent with domestic sales up by just over 18 per cent.
The companies surveyed reported $513 million in annualised sales, with an export content of 40 per cent.
The survey came out on the day the New Zealand dollar rose through US78c, the first time it has done so since the kiwi was floated 22 years ago.
CMA chief executive John Walley said the survey indicated things were going well for some manufacturers who reported strong revenue numbers.
Despite the sales increases, the "rampant" New Zealand dollar was eating away at returns at one end, with some significant cost increases chipping away at the other, he said.
Most manufacturers in this country did not sell to consumers. Rather they were largely links in supply chains and were reporting slow and difficult payments.
"This is a clear indication that things are getting worse," Mr Walley said.
An issue cropping up in the survey was that it appeared to be increasingly difficult to attract research and development to this country.
"Local companies have well-established relationships with offshore partners that have been willing to invest in R&D, yet these partners are finding it difficult to justify R&D in New Zealand.
"Better conditions exist elsewhere in the developed world and the NZD bubble expands at the cost of losing future opportunities in New Zealand," he said.
The survey's current performance index, a combination of profitability and cash flow, was up from 95 in April to 96 in May, with anything under 100 indicating a contraction.
The change index, measuring capacity utilisation, staff levels, orders and inventories, increased to 103 from 99, while the forecast index, measuring investment, sales, profitability and staff dropped to 102 from 105.
Net confidence was recorded at 8, down from 25 last month.
- NZPA
