9 Dec 2011
The Dominion Post
Hamish Rutherford

MANUFACTURING volumes shrank for the second quarter in a row to the end of September, and economists say the coming months will remain challenging.

Statistics New Zealand said manufacturing sales volumes fell 1.4 per cent in the three months to September, the same level of contraction as the previous three months.

ANZ economist Mark Smith said an increase in the level of finished products in the September quarter meant manufacturing would likely contribute to economic growth in the quarter, but this could act as a drag on growth at the end of the year as companies tried to run down stock.

Smith said global uncertainty would make it difficult to gain momentum, with the Reserve Bank warning of a sharp slowdown for our trading partners, at a time when the New Zealand dollar remained strong.

‘‘For some firms there will be scope to divert production to the domestic market, but further delays from earthquake reconstruction work could see less support from this route.’’

Several sectors showed sharp declines in volumes over the previous quarter, with seafood down 11.4 per cent, metal products down 4.7 per cent and chemicals down 2.4 per cent.

Wood products saw a 0.7 per cent decrease, prompting warnings from First Union general secretary Robert Reid, who said while logs were being sold overseas at a profit, the value-added elements of the sector were on a downward spiral.

‘‘Unless we take steps to better structure our economy to take full advantage of our resources, we risk seeing less value-added manufacturing in areas like wood processing, because the value we add can often be beaten by China or India’s low wages and costs.’’