Confidence and domestic sales down, exports up

Confidence and domestic sales down, exports up - 2 May
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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during April 2014, shows total sales in March 2014 increased 12.57% (year on year export sales increased by 29.33% with domestic sales decreasing 3.05%) on March 2013.

The NZMEA survey sample this month covered NZ$403m in annualised sales, with an export content of 55%.

Net confidence was at 0, down on February’s result of 35.

The current performance index (a combination of profitability and cash flow) is at 101.7, up from February’s result of 98.7, the change index (capacity utilisation, staff levels, orders and inventories) was at 101, down from 105 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104, down on February’s result of 107.67. Anything less than 100 indicates a contraction.

Constraints reported were 53% markets, 20% capital, 13% production capacity and 13% skilled staff.

Net productivity was unchanged on last month.

Staff numbers for March increased year on year by 0.33%.

All staff segments, tradespersons, operators/labourers, supervisors, managers and professional/scientists, reported a moderate shortage for March.

“This month showed generally more of what we have been seeing over the last few months, domestic sales falling (it is worth noting that few of our members are directly related to construction), while export sales increases, however export sales are returning little margin with an elevated currency. Net confidence fell, indexes were mixed and staff numbers increased slightly.”

“Comments were also mixed, but it is clear the exchange rate is having an effect on those supplying the domestic economy by increasing import competition, while remaining an issue for exporters.”

“The Reserve Bank of New Zealand (RBNZ) raised interest rates for the second time last week which puts further pressure on the exchange rate. The RBNZ keeps on saying that the current level of our currency is not sustainable but does nothing in that regard other than welcome the deflationary impact of an appreciating currency.”

“If the current high levels continue, the tradable sector will go on suffering for the sake of some reduction of inflationary pressures through lower import prices. Does this make sense, when the success of our tradable sector is vital to our economic future?”

“What is the message to the traded sector? Suck it up?”

“It was great to see some progress in this regard by Labour, who announced their proposed reform to Monetary Policy earlier this week. These are changes that the tradable sector needs, and in turn will have positive effects on the rest of the economy. We hope this spurs constructive discussion on the economy and the Government look at this as a possible change, rather than simply dismissing its potential.”

“A continued single minded focus on inflation with no regard for the external balance could well result in an economy struggling to function as capacity in the added value traded sector falls away.”

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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.

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