Sales hold up despite market concerns

5 February 2009

Sales hold up despite market concerns

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during January 2009, shows total sales in December 2008 increased 4% (export sales increased by 2.06% with domestic sales increasing 8.74%) on December 2007.

The NZMEA survey sample this month covered NZ$256m in annualised sales, with an export content of 70%.

Net confidence rose to -73, up from the -82 result reported in October, still dire but improving a little.

The current performance index (a combination of profitability and cash flow) is at 96, up from 88.5 in October, the change index (capacity utilisation, staff levels, orders and inventories) held steady at 96, and the forecast index (investment, sales, profitability and staff) is at 91.3, down on October’s result of 92.3. Anything less than 100 indicates a contraction.

The reported constraints were: 9% production and 91% markets.

Staff numbers for December decreased year on year by 0.70%.

“With the bias in this sample towards exports, a slowing world economy has started to show in export numbers, but, overall sales are holding up,” says NZMEA Chief Executive John Walley. “Export sales growth has slowed particularly for anyone associated with, for example, automotive or consumer electronics supply chains. Unfortunately, slowing markets are cancelling out the affect of the low dollar on export margins.”

“Stimulus packages both here and overseas will take a while to flow through. A lot of the planned spending does not kick in until later this year or in 2010 so despite the almost unimaginably numbers there is limited immediate impact.”

“In New Zealand the restrained action from Government coupled with a high percentage of fixed term home loans, which blunts the impact of cuts in the cash rate, leaves us hoping that the actions taken in the big economies bring consumers back to the party sooner rather than later.”

“The package announced to help small businesses, while helpful, was fairly limited in comparison to what we have just seen in Australia and elsewhere. The new initiatives will assist cash flows a bit, but is unlikely to encourage further investment in the absence of a general economic turnaround or an explicit long-term strategy for the real economy.”

“The Official Cash Rate cuts, the Resource Management Act reforms and the additional tax measures will help our productive sector, but it is important that their long-term viability is supported. This means looking at the balance of the tax system and ways to minimise fluctuations in the exchange rate when inflation again becomes the problem of the day.”

The New Zealand Manufacturers and Exporters Association survey gathers results from members around New Zealand. It provides a monthly snapshot of manufacturers and exporters’ sales and sentiment.

ENDS

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