Trade deficit a growing problem

Trade deficit a growing problem

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2013, shows total sales in July 2013 decreased 2.62% (export sales decreased by 3.7% with domestic sales decreasing 1.74%) on July 2012.

The NZMEA survey sample this month covered NZ$551m in annualised sales, with an export content of 44%.

Net confidence fell to 9, down from the 13 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 104.7, up from 98 in June, the change index (capacity utilisation, staff levels, orders and inventories) went down to 102 from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104.33, up on June’s result of 102.67. Anything less than 100 indicates a contraction.

Constraints reported were 55% markets, 18% production capacity, 18% skilled staff and 9% capital.

Staff numbers for July decreased year on year by 0.48%.

“Sentiment and our composite indexes are generally positive; however sales and employment continue to contract year on year.” says NZMEA Chief Executive John Walley.

“We are relieved to see the Reserve Bank of New Zealand (RBNZ) finally move to introduce limits on high loan to value ratio mortgages, creating more space around interest rates.”

“Recent falls in the value of the New Zealand dollar (NZ$) are overdue, and RBNZ comment around interest rates in the future has taken some pressure off the currency. The NZ$ is still overvalued but any move towards a more sustainable level is welcomed by exporters; a measured realignment over time would be the preferred path for those significantly hedged.”

“The expected tapering of the Federal Reserve stimulus should help the US cross rate; but a long term policy response is needed to provide better currency stability into the future.”

“Market demand is a challenge and in particular the slowing of Australia and the weakening of the Australian dollar impacting margins.”

“Market softness is hitting everyone, competitors buying work in Europe and the USA and low prices on imports to New Zealand featured in the commentary this month.”

“This weeks Overseas Merchandise Data showed the value of imports increasing by $676m (17%), while goods exports fell by $196m (4.8%). This also showed a trade deficit of $774m (20% of exports) this is the critical deficit that policy needs to consider.”

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