KEY POINTS:
Confidence among Canterbury manufacturers dipped this month despite sales in December increasing 17 per cent.
The Canterbury Manufacturers' Association (CMA) survey of business showed net confidence dropped to minus 10 per cent this month from minus 8 per cent last month.
Exports in December were up 12 per cent and domestic sales up 22 per cent.
The current performance index (a combination of profitability and cash flow) was at 97.5, up from the previous month's 97.
The change index (capacity utilisation, staff levels, orders and inventories) decreased to 99 from the previous months 104, and the forecast index (investment, sales, profitability and staff) is at 104.2, down on the previous month's result of 106.
The main constraint was the market (64 per cent), followed by production, 18 per cent and staff, 18 per cent staff .
Staff numbers for December increased by just over 4.8 per cent.
CMA chief executive John Walley said the result was very similar to the previous month in that short term results are improving in the sector, yet confidence continues to drop.
"The sentiment around this survey is that in the short term, things are okay with some respondents saying that orders and sales numbers are improving early in the New Year.
"However, further out our respondents foresee problems, due to high interest rates, strong dollar, the gap between the two economies and the possible impacts of the global credit crunch," Mr Walley said.
He said respondents don't expect interest rates to fall this year, and New Zealand dollar was pushing back towards US80c.
"This cycle will continue to have the inevitable effect on exporters.
"Humanware has announced its relocation plans and the Reefton sawmill has said it is closing in March.
"These announcements show that both elaborate and basic manufacturers are under pressure."
He said the loss of Humanware illustrated the fallacy in the argument that production can be lost while retaining research and development indefinitely.
He called for an agenda for change where policy makers would provide support for firms investing in new equipment, developing new products and investment in overseas markets.
"Policies need to change so that the New Zealand economy operates with differences between inflation and the base interest rate closer to the OECD average, otherwise we can anticipate a protracted and artificially high exchange rate as global liquidity chases New Zealand's higher interest rates laying waste to returns for our exporters."
- NZPA