Sales are growing but returns falling for manufacturers as the high dollar hits, says the Canterbury Manufacturers' Association.
The association's latest survey shows sales in March were up 6.8 per cent, including export sales growth of 5.8 per cent.
However, the performance index measure of profitability and cash
flow was 94, which although up from 93 the previous month was still below 100 - indicating a contraction.
Association chief executive John Walley said sales numbers suggested that life for manufacturers was not that bad, although the performance index showed the impact of the strength of the dollar.
"Some companies report that demand is holding up and their factories are busy but returns are falling," Walley said. "Manufacturers can't live off their balance sheets forever."
Raw material costs had also increased, he added.
Net confidence fell to minus 8 per cent in March from zero in February but the forecast index increased to 102 from 101 in February.
"The forecast index shows slight expansion but exporters have to be optimistic or mad," Walley said.
The wider impact on the supply chain of plans by Fisher & Paykel Appliances to relocate laundry manufacturing to Thailand was yet to be seen, he said.
The external sector was being killed by a feedback loop of house price inflation driving spending on imports, pushing up the OCR and thus the exchange rate, which then made imports cheaper, he said.
Manufacturing Outlook
* Net 8 per cent pessimistic.
* Sales in March up 6.7 per cent on last year.
* Profitability and cash flow contracting.
