Upturn in Asia set to cheer sector

By Brian Fallow

WELLINGTON - The manufacturing sector treaded water in the first three months of the year.

Seasonally adjusted sales were flat at $12.4 billion, but that was an improvement on the previous four quarters of declining sales. Sales were 4.1 per cent down on the March quarter last year.

Domestic demand for manufactured goods appeared to be improving, Statistics New Zealand said, while the trade data indicated manufactured exports were lower in the quarter.

Manufacturers Federation economist Peter Crawford said exports of elaborately transformed manufactures were 8 per cent higher than in the March 1998 quarter, but manufactured commodities (like aluminium, wood products and methanol) were 9 per cent lower.

With signs of incipient recovery in Korea and now Japan, the outlook for manufactured commodities is improving.

And the prospects for higher-value-added manufactured exports, whose major market is Australia, have improved with the recent fall in the transtasman exchange rate.

Over the past month the New Zealand dollar has fallen 3 per cent against the Australian.

In the latest quarter the largest decline in sales (5.7 per cent seasonally adjusted) was in meat and dairy product processing, reflecting drought conditions.

Wood and paper processing was also off, by 2.2 per cent, but sales in the machinery and equipment sector rose 5.5 per cent.

Capital expenditure was down 20 per cent to $425 million its lowest level for six years. The decline in investment was across the board, apart from the wood and paper product sector.