Slippery slope for exporters – 6 September

Slippery slope for exporters – 6 September

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2012, shows total sales in July 2012 decreased 3.2% (export sales decreased by 0.7% with domestic sales decreasing 5.3%) on July 2011.

The NZMEA survey sample this month covered NZ$504m in annualised sales, with an export content of 47%.

Net confidence dropped to -11, down from the 17 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 104.5, up from 103 in June, the change index (capacity utilisation, staff levels, orders and inventories) went down to 103 from 104 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 101, down on June’s result of 102. Anything less than 100 indicates a contraction.

Constraints reported were 89% markets and 11% skilled staff.

Staff numbers for July decreased year on year by 1.4%.

“There has been another downturn in sales this month,” says NZMEA Chief Executive John Walley. “Conditions for exporters are about as bad as they have been in living memory with the high exchange rate exacerbating weak markets here and overseas. Job losses at Solid Energy and the reduction of milk payouts show the impact of these factors on the export sector.”

“The continuing decline in staff numbers highlights the lack of investment we have seen for about the last seven years.”

“The situation in world markets has deteriorated right across the board. Exchange rates with the United States and Europe are prohibitively high exacerbating poor sales numbers, and orders from the US have slowed as they wait for the result of their election. Demand also seems to be drying up in Australia and China.”

“However, some respondents reported increased sales and interest from South America.”

“Respondents from Christchurch reported some wage pressure from the Christchurch rebuild which could worsen over the next year or two. More encouragingly there are also some reports of Geotech surveys on land being completed with a view to getting building on replacement factories underway.”

“There are concerns about development levies being charged by the Christchurch City Council. Essentially a firm gets their insurance payout and is then charged a large fee to build somewhere else. This is a huge hurdle considering most payouts may not cover the cost of the rebuild in any case – this approach might well drive jobs and capital from Christchurch.”

“Exporters can’t grow with our exchange rate where it is. A Reserve Bank Amendment Bill is being brought before Parliament and it is vital that it is sent to Select Committee so that options to deal with the exchange rate can be explored. We cannot just watch other countries devalue their currencies and take no action ourselves if we wish to see a functioning export industry.”
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