Confidence, but risks in trade arena

Virginia Nicholls
Virginia Nicholls
Manufacturing in Otago and Southland continues its strong run in October, but escalating US-China trade tensions, Brexit issues and friendly trade deals are coming into sharp focus.

For October the BNZ- BusinessNZ manufacturing saw Otago ease back from 60.3 points the month before to 59.4. Points above 50 are expansion, and below, contraction.

Otago Southland Employers Association chief executive Virginia Nicholls said while the export sector remained strong, exporters might have challenges ahead.

"Particularly in the face of escalating tensions related to international trade and protectionist measures," she said.

Aside from US-China issues, both the outcome of the contentious Brexit plan and recent ratifications under way in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) raise issues for southern manufacturers and exporters.

"We’re recommending that exporters should be making contingency plans if the United Kingdom and European Union are unable to make a deal on Brexit," Mrs Nicholls said.

She said southern exporters were encouraged  by the ratification by Australia CPTPP, which has now delivered the quorum required to start the process leading to the CPTPP taking effect.

"This should now become a reality by the end of this year," Mrs Nicholls said.

The CPTPP brought Japan, Canada and Mexico into a trade deal with New Zealand for the first time.

"Other country members of CPTPP will also offer terms of trade more favourable to our exports," Mrs Nicholls said.

Otago’s 59.4 point score was just beaten out by the upper North Island’s 60.1, followed by central North Island on 54 and upper South island on 53.3.

Mrs Nicholls said October points were above the average from the last year of 54 points.

In the regional breakdown, all categories were in expansion, with new orders above 60, employment levels and deliveries of raw materials 58.8 and production levels and stocks of finished products at 52.9.

The proportion of positive comments is sitting at 70%, she said.

Manufacturers supplying the construction industry remained busy and export metal product manufacturers reported steady sales with positive summer orders.

"Some engineering manufacturers are reporting some short-term gaps in work, but there are some significant contracts that have been secured for the new year," Mrs Nicholls said.

BusinessNZ executive director for manufacturing Catherine Beard said the October result, rising by 1.6 the previous month to 53.5, was a welcome change from where the survey had sat during the previous four months.

"In line with the improved overall result, the proportion of positive comments; 58.3%, also increased, with demand for products from offshore customers noted throughout."

simon.hartley@odt.co.nz

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