Mixed signals, strong sales - 8 August

Mixed signals, strong sales - 8 August

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during July 2014, shows total sales in June 2014 increased 28.38% (year on year export sales increased by 30.45% with domestic sales increasing 26.38%) on June 2013.

The NZMEA survey sample this month covered NZ$552m in annualised sales, with an export content of 50%.

Net confidence was at 8, down from 20 in our survey last month.

The current performance index (a combination of profitability and cash flow) is at 97, up from 95.7 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 99, down from 101 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 102.5, down on the last result of 105.33. Anything less than 100 indicates a contraction.

Constraints reported were 84% markets, 8% production capacity and 8% skilled staff.

Net 15% of firms reported a modest rise in productivity for June.

Staff numbers for June increased year on year by 4.79%.

Tradespersons, operators/labourers, supervisors, managers and professional/scientists all reported a moderate shortage.

“June reported another very good month for manufacturers and exporters, with turnover improving both domestically and in exports; however there is some concern over the future in the responses,“says NZMEA Chief Executive John Walley.

“Staff numbers improved slightly above the trend of recent months, while confidence fell along with two out of three indexes (forecast and change).”

“While sales continue to grow, comments indicate there is considerable concern around the dollar. The market constraint, at its highest since May 2013, indicates some demand softness across trading partners, production capacity was not indicated as a major problem in our last survey.”

“In the latest OCR statement the Reserve Bank of New Zealand (RBNZ) made a real effort to talk down our currency, which was not responding to the significant fall in dairy prices since January 2014 – this had some success with the currency pegging back nearly 4% after approaching a post float high in early July.”

“The fact the currency has remained above January levels despite these falls must bring into question the idea of auto stabilisation of returns around commodity prices and exchange rates. The RBNZ need to do more than just talk to bring the currency down to justifiable and sustainable levels.”

“The recent job losses at Buckley Systems are an example of the effect an overvalued currency can have on even high margin, innovative, high technology firms – once lost this sort of activity is hard to regenerate.”

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.

ENDS

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