Manufacturers less confident

By Phil Boeyen, ShareChat Business News Editor

Tuesday 17th April 2001

There will be even more pressure for a fall in interest rates this week following a sharp drop in manufacturers business confidence.

The survey of manufacturers opinion follows a fall last week in overall business confidence.

According to the latest WestpacTrust quarterly survey a net 12% of manufacturers expect the general business situation in New Zealand to deteriorate over the next six months compared with a net 24% in December who expected the economy to improve.

A range of factors is being blamed for the confidence turnaround, including a much weaker economic outlook in export markets, particularly Australia, a lack of domestic growth, and the recent fall in the Australian dollar.

Other factors include the weak New Zealand dollar continuing to put pressure on costs and concerns about high levels of finished stocks.

President of the New Zealand Manufacturers Federation, David Maloney, says uncertainty about future profit levels was the major factor in the deterioration of manufacturing business confidence.

"A major long term concern facing the sector is the constraints facing firms attempting to expand."

According to the survey 14% of respondents blamed a shortage of capacity, 8% materials and components, 7% finance and 4% said labour was the single biggest factor limiting their ability to increase turnover.

"With just a net 2% of manufacturers planning to increase investment, growth in the sector will be constrained until confidence improves," says Mr Maloney.

The Reserve Bank is due to announce any change to the Official Cash Rate on Thursday.

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