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Overview of the manufacturing sector

Jane Turner

This article examines recent trends in New Zealand's manufacturing sector. It finds that sales to the domestic market have been reasonably robust in recent years, reflecting the strong local economy. However, the share of imports in local sales has been rising, partly due to structural factors and partly due to the rising exchange rate. Manufactured export activity has fluctuated in recent years, with key influences including the exchange rate, commodity prices, and cycles in trading partner economies. After some weakness in 2002 and 2003, export sales strengthened in 2004, helped by the global economic cycle. The article finds that profitability (the earnings to sales ratio) has fallen for many industries over this period, which is likely to reflect a rising exchange rate and ongoing competitive pressures.