No green shoots of recovery yet

5 June 2009

No green shoots of recovery yet

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during May 2009, shows total sales in April 2009 decreased 59% (export sales decreased by 53% with domestic sales down 62%) on April 2008.

The NZMEA survey sample this month covered NZ$423m in annualised sales, with an export content of 42%.

Net confidence slipped to -50, down from the -42 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 91, up from the previous month’s 89.5, the change index (capacity utilisation, staff levels, orders and inventories) went up to 94 from 91 last month, and the forecast index (investment, sales, profitability and staff) is at 91.3, down on the previous month’s result of 96.8.  Anything less than 100 indicates a contraction.

The reported constraints were: 8% capacity and 92% markets.

Staff numbers for April decreased year on year by 17%.

“Manufacturing sales have dropped markedly across the board,” says NZMEA Chief Executive John Walley.  “Export sales in particular have again deteriorated significantly year on year.”

“Stimulus packages around the world appear to have done little to kick start demand.  We have not yet seen the bottom.  Firms selling to Government, Government funded buyers and some niche manufacturers are still finding markets, but overall the situation is bleak.  The appreciation in the New Zealand dollar will have a major impact on margins, and more importantly, sentiment amongst exporters.”

“There are still weak forward orders causing manufacturers to reduce capacity and lay-off staff.  The optimists have reported ‘green shoots’ appearing in the United States; there are no signs of this in the survey.”

“Last weeks steady as she goes Budget did not offer much hope or support for exporters.  Our distorted tax framework and ill-targeted monetary policy system remain resolutely sacrosanct.”

“The Government has focused its attention on New Zealand’s public debt situation, but structural changes in the tax and monetary policy framework are needed to address the anaemic growth forecasts for the next few years.  Cost cutting will not fix the problem; the only way out is to produce more.”
ends

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