Forestry stems manufacturing growth

By Brian Fallow

WELLINGTON - Manufacturing investment is in freefall, compromising long-term growth in the sector, warns WestpacTrust in its quarterly analysis of manufacturing.

In the year to June investment fell 29 per cent to $1.5 billion, the lowest level since 1993.

As a percentage of sales it has dropped to 3.8 per cent, the lowest level for five years and well below the long-term average of 4.5 to 5 per cent.

Investment in forest-based manufacturing was $404 million in the year to June, down 51 per cent on the previous year.

"The decline may be a function of the recent deep recession in the forest industry worldwide, which has suffered from overcapacity in pulp and paper and an oversupply of softwoods," it said. "Clearly investment in this sector needs to be upped soon if there is to be any hope of the local industry being able to add value to the pending wall of wood."

Overall, the June quarter data provided a clear indication that the manufacturing sector is on the rebound, with exports of elaborately transformed (non-commodity) manufactures posting a 9.3 per cent increase in the quarter, compared with the same period last year.

Figures for the year to June, however, show a stark disparity between a resurgent exports and domestic sales hammered by competition from Asian imports and the removal of tariffs. Exports in the June year were up 7.7 per cent on the previous year, while domestic sales fell 5.4 per cent.

The outlook for the sector is reasonably bright, WestpacTrust said, with a sharp rebound in Asia expected to underpin strong sales growth through late 1999 and early 20000, while domestic sales should benefit from a "convalescing" residential sector and steady growth in private consumption.