Double dip gets more likely

Double dip gets more likely - 23 December

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during December 2010, shows total sales in November 2010 decreased 5% (export sales decreased by 9% with domestic sales decreasing 2%) on November 2009.

The NZMEA survey sample this month covered NZ$405m in annualised sales, with an export content of 39%.

Net confidence rose to 23, up from the 0 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 102, down from 102.5 in October, the change index (capacity utilisation, staff levels, orders and inventories) went up to 101 from 100 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 107.5, up on October’s result of 107. Anything less than 100 indicates a contraction.

Constraints reported were 77% markets and 23% production capacity.

Staff numbers for November increased year on year by 3%.

“Sales results have remained extremely variable amongst manufacturers as some markets have picked up but some firms are still struggling to find sales,” says NZMEA Chief Executive John Walley. “There continues to be growth in sales to Australia and Asia, but firms selling domestically or to the United States and Europe are struggling.”

“The exchange rate remains the elephant in the room of an export led recovery.”

“Respondents have reported that they have lost contracts because of the high New Zealand dollar.”

“There is some optimism about next year as the improved confidence rating shows but orders remain very short-term and uncertain. There is also concern that continued quantitative easing next year may cause the exchange rate position to worsen.”

“We need to see a new resolve from the Government on growing exports in the New Year. Poor conditions for the tradeable sector and the cavalier attitude from the Government towards our debt problems are an increasingly serious issue. Fast growing debt and actual growth falling below forecast require action. As Kerry McDonald, head of the Savings Working Group noted, if we do not address the debt situation ourselves then we are vulnerable to a major economic shock.”

“Some cost cutting is needed to address the Government debt position but a focus on tradeable sector growth is the key issue. That means a more stable exchange rate and a balanced tax system.”

ends

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