Southern manufacturing slips

Manufacturing in Otago and Southland during January has slipped into slight contraction, after leading the country's four regions for two months, while the rebuilding of Christchurch appears to be gathering impetus.

About 200 manufacturing jobs remain at threat around Otago and the stubbornly strong New Zealand dollar - the export sector's Achilles heel - hit a record high against the British pound yesterday.

In the monthly BNZ-Business New Zealand performance of manufacturing index, a reading above 50 indicates expansion, and below, contraction.

Nationally, the manufacturing index rose to 55.2. All but one of the five sub-indices reflected expansion. Otago Southland plunged from 60 in December to 48.1. The national employment sub-index declined to contraction at 48.4.

The other three regions all gained, headed by Canterbury Westland rising to 54.9, northern North Island to 50.7 and southern North Island 49.9.

BusinessNZ executive director for manufacturing Catherine Beard said while the January result was ''heartening, it was still too early to predict whether 2013 would be a better year for manufacturers than 2012.

Otago Southland Employers Association chief executive, John Scandrett, said the negative feedback from January was based on sluggish outcomes in metal product, paper and machinery activities and reference ''to the impact a fragile retail scene can exert on our manufacturing performance''.

While it has no immediate bearing on the manufacturing index, during the past month almost 200 mill workers in Oamaru were made redundant, and Dunedin-based Farra engineering is in consultation with fabrication staff, and could possibly shed six jobs.

Mr Scandrett said yesterday that general job losses in manufacturing were reflected in the employment index, which has remained in contraction for eight consecutive months.

''However, what we are seeing with the broader results is that job losses do not equate with overall declines in activity, as three of the last four months have shown growth in the sector,'' he said.

There was also a healthy lift in new orders for January, along with continued recovery work in the Canterbury region, which should assist production levels in the months ahead, Mr Scandrett said.

The New Zealand dollar remains persistently strong against the Australian and United States counterparts, hurting any exporters, and yesterday the kiwi hit a high against the British pound, at 54p.

Mr Scandrett said the ''currency situation'' of the strong kiwi continued to buffet exporters and was likely to continue that way for some time.

Despite the Otago Southland dip from December, Mr Scandrett said the recent survey comments were mixed and there was still strength around the new orders, finished stock and deliveries sub-indices.

''We can also identify positive sentiment flowing within key sub-sector activity areas, especially food and beverage, wood products, boat building and selected textile operations,'' he said.

BNZ economist Doug Steel said, `While positivity seems to be increasing among those associated with the much-anticipated lift in domestic construction activity, there was growing anxiety among those that supply the slowing Australian economy''.

- simon.hartley@odt.co.nz