Two economies means a lot of work to be done

Two economies means a lot of work to be done

The latest Canterbury Manufacturers’ Association (CMA) Survey of Business Conditions completed during September 2007, shows total sales in August 2007 increased just under 1.5% (export sales dropped by 6.8% with domestic sales increasing just over 9%) on August 2006.

The CMA survey sample this month covered NZ$402m in annualised sales, with an export content of 44%.

Net confidence improved to -18, up from the -60 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 98.5, up from the previous month’s 96, the change index (capacity utilisation, staff levels, orders and inventories) increased to 103 on the previous month, and the forecast index (investment, sales, profitability and staff) is at 102. Anything less than 100 indicates a contraction.

Constraints reported 18% staff, and markets 82%.

Staff numbers for August increased by just over 4%.

“This latest survey contains both good and bad results as current policy settings are delivering two economies, with one major exporter reporting that “things have not been so bad in a generation”; while another major player in the domestic market reports that “things have not been so good in a generation”. Do these sentiments reflect smart management of the economy?” asks Chief Executive John Walley. “We think not”.

“Companies with a domestic focus report favourable conditions, and the construction sector remains strong, especially large scale infrastructure projects outside of the four main centres, such as energy and road developments. The easing of the NZ Dollar against the AUD has also helped relieve some pressure on margins”.

“Many of our manufacturing firms are continuing to struggle and we are seeing signs that companies within the supply chains are under increasing pressure as the larger companies, to whom they supply, look to cut their own costs and shift activity, resulting in a reduction in local orders. This is due in large part to the impact of the ‘China price’. Some respondents are undertaking contract work, while others re-evaluate their business models in order to give themselves breathing space. For these firms, sales volumes are down and margins are under pressure, or gone all together”.

“The survey shows that New Zealand has ‘two economies’, divided essentially between tradeables and non-tradeables. The much higher levels of inflation in the non-tradeables sector are creating a response that is killing the competitiveness of the tradable sector, and we continue to export activity and capability offshore as a response. This is a short sighted solution that will bring long-term problems; there has to be a smarter way.”

CANTERBURY MANUFACTURERS' ASSOCIATION
Survey of Business Conditions – August 2006 compared with August 2007

SAMPLE SIZE: The Survey respondents represent elaborate transformed manufacturers with annual sales of approximately $402 million.

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages)
August July
TOTAL TURNOVER: Export /Domestic ratio 44/56 47/53
% Change in Total Turnover INCREASED 1.47 -3.89

DOMESTIC TURNOVER: % of respondents reporting a rise 70 44
% of respondents reporting a fall 30 44
% of respondents reporting no change 0 11
% Change in Ave Domestic Turnover INCREASED 9.17 -5.11

EXPORT TURNOVER: % of exporters reporting a rise 44 28
% of exporters reporting a fall 33 57
% of exporters reporting no change 22 14
% Change in Average Export Turnover DECREASED -6.85 -2.49

STAFF NUMBERS: % of respondents reporting a rise 70 50
% of respondents reporting a fall 10 10
% of respondents reporting no change 20 40
% Change in Average Staff Numbers INCREASED 4.02 7.44

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages.)

Large Fall
(Over 15%) Modest Fall
(2.5%-15%) No Change
(Within 2.5%) Modest Rise
(2.5%-15%) Large Rise
(Over 15%)
Aug July Aug July Aug July Aug July Aug July
Profitability (YoY) 9 20 27 50 18 0 45 30 0 0
Cashflow (YoY) 9 0 36 40 27 40 27 20 0 0
Exchange Rate (YoY) 0 30 36 30 9 40 55 0 0 0
Investment Forecast 9 0 9 50 36 10 27 30 18 10
Sales Forecast 0 10 18 30 27 10 45 50 9 0
Profit Forecast 0 10 36 40 27 20 36 30 0 0
Staffing Forecast 0 0 18 20 73 50 9 30 0 0
Very
Negative Negative Neutral Positive Very
Positive
Confidence 0 10 36 60 45 20 18 10 0 0
Constraint Production Skilled Staff Capital Market
0 10 18 10 0 0 82 80

Net Confidence Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2003 +21 -6 +12 -11 -5 +12 -6 0 +11 +40 +29 +33
2004 +5 +19 +41 +41 +36 +50 +12 +20 +7 0 -7 +5
2005 +13 -13 -6 -25 -33 -13 -13 -36 -27 -32 -29 -33
2006 -47 -13 -23 -29 -42 -13 -14 +8 +15 -7 40 0
2007 -17 0 -8 25 8 -17 -60 -18

Index
(base =100) Aug
06 Sept 06 Oct
06 Nov 06 Dec 06 Jan 07 Feb 07 Mar
07 April
07 May 07 June 07 July 06 Aug 07
Performance 95 95 93 101 91.5 98 93 94 95 96 95.5 96 98.5
Forecast 104 100 101 108 102 101 101 102 105 102 102 99 102
Change 99 103 102 107 100 100 100 99 99 103 103 102 103

ends

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