10 Apr 2014

Manufacturers feeling benefit of rebuild

7:16 pm on 10 April 2014

Manufacturers are starting to see greater levels of activity now the rebuilding of earthquake-hit Canterbury is finally underway. But exporters face harder times, with a high dollar cramping earnings.

The latest survey found manufacturing activity expanded for the 19th month in a row and the pace is picking up. The BNZ-Business New Zealand performance of manufacturing index stands at 58.4, its highest level since July last year. A reading above 50 indicates expansion.

The Christchurch rebuild is expected to bolster manufacturing activity for years.

The Christchurch rebuild is expected to bolster manufacturing activity for years. Photo: PHOTO NZ

The gains were led by production and new orders, while employment is at its highest level in more than six years.

Manufacturing New Zealand executive director Catherine Beard said the expansion is mainly being driven by the Christchurch rebuild following damaging quakes in 2011 is now getting properly underway and should underpin activity for years to come.

"For a long time we would hear manufacturers and businesspeople saying, It's happening but we're not seeing the impact of it'. So maybe that's starting to flow through now because it was

quite a slow start."

High global dairy prices have prompted farmers to build milking sheds, bolstering manufacturers in regions like Waikato.

Les Kendall, chief executive at the commercial air conditioning maker Temperzone, says the growth is being felt more broadly than just Canterbury and Auckland.

"There's a little bit more activity around the Christchurch rebuild and there just seems to be generally a bit more commercial property activity happening in Auckland and right across the country really."

It's estimated 60 percent of manufacturing production is sold locally. But for exporters, the outlook is much tougher. Temperzone exports to Australia, and Mr Kendall says the high dollar has made it particularly hard.

"We're really just nibbling away at market share of our competitors the best that we can, but obviously the exchange rate at the moment between the Aussie and the Kiwi is making that very challenging, being at a record high there as well."

A union which represents manufacturing workers says the activity is not translating into a lot of extra jobs just yet.

The national secretary of the Engineering, Printing and Manufacturing Union, Bill Newson, says manufacturers linked to construction in Canterbury and Auckland are much more confident than those competing overseas.

"There are positive signs about intentions to employ (but) no significant actual employment numbers coming through at this stage."

But Catherine Beard is upbeat, saying that despite the prospect of higher interest rates she expects the rebuilding of Christchurch will take years to complete, as will fixing housing shortages in Auckland.

An analysis of March traffic flows also indicates the economy continues to grow strongly. ANZ Bank's Truckometer measures traffic flows on certain roads and calculates the economic impact.

The heavy traffic index, an indicator of the economy right now, fell 1.1 percent last month, after a particularly strong February. The light traffic index, which predicts growth six months ahead, rose 1.1 percent.

ANZ economist Sharon Zollner said both indices rose strongly over the March quarter, indicating that the economy will enjoy solid growth well into the middle of this year.

An aerial view of the central business district showing demolished sites a year ago.

An aerial view of the central business district showing demolished sites a year ago. Photo: PHOTO NZ