Exchange rate knocks numbers on factory floors

Jobs are disappearing from Auckland factory floors, as the high exchange rate begins to bite.

The ANZ-Business New Zealand performance of manufacturing index for March indicates activity is still expanding, but less so than in February and much less than a year ago.

While production, new orders, deliveries and stocks were all in positive territory, manufacturing employment shrank, driven by steep declines in Auckland and Northland.

That area's employment sub-index fell from 53.3 in February to 45.7 last month. Over 50 means expansion, below 50 contraction.

Bruce Goldsworthy of the Employers and Manufacturers Association said the high exchange rate was impacting on exporters and firms competing with imports.

He said there was a shift to using overseas sources of componentry.

In addition, some manufacturers were opting to export their products in bulk, and break down and package them offshore, Goldsworthy said, which meant a flow-on effect to the manufacturers of packaging.

The decline in the PMI echoes an Institute of Economic Research survey of business opinion, which found more manufacturers had cut staff numbers than increased them for the first time in two years.

Goldsworthy said the slowdown could largely be attributed to the high exchange and interest rates.

Manufactured exports continued to grow, increasing 12.7 per cent to just over $13 billion in the year ended February. Manufactures represent about 44 per cent of goods exports.

The IER found a net 7 per cent of manufacturers reported an increase in export sales over the previous three months. But such levels were not very high by historical standards, the institute said.