Currency turns sentiment around

Confidence among manufacturers rebounded in August as orders picked up, the latest Canterbury Manufacturers' Association survey says.

July's net pessimism of minus 14 per cent was turned into a net confidence of plus 8 per cent in August.

August sales were up 11 per cent on the same month last year in a sample size of $490 million in annualised sales.

Association chief executive John Walley said there was a sense of buoyancy among manufacturers who experienced a pick-up in forward orders, despite anecdotal evidence of slowing immediate sales.

"Our members report that parts of the domestic market and specific export niches are strong and as a result revenues are increasing on the same time last year," Walley said.

Confidence was net positive for the first time since January last year, with manufacturers enjoying decent export returns at a lower exchange rate.

"It is worth noting that as half our members' revenue flows from export markets, sentiment and performance are highly linked to exchange rates," Walley said.

The exchange rate has risen sharply since the survey was taken. If the trade deficit was to be closed, then Government policy should be more concerned with addressing the "yo-yo" currency, Walley said.

"There is little room for complacency, improvements are there but they are fragile and off a low base."

Staff numbers for August decreased by 1 per cent.

The performance index (profitability and cash flow) was 95 compared with 96 last month, and the forecast index (investment, sales, profitability and staff) was 104, up from 97 in July. Results less than 100 indicated a contraction.