We need more exporters and exports
3 October 2008
We need more exporters and exports
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during September 2008, shows total sales in August 2008 increased 19% (export sales increased by ~76% with domestic sales decreasing ~6%) on August 2007.
The NZMEA survey sample this month covered NZ$596m in annualised sales, with an export content of 45%. Net confidence increased to -22, up from the -33 result reported last month.
The current performance index (a combination of profitability and cash flow) is at 97, down from the previous month’s 98.5, the change index (capacity utilisation, staff levels, orders and inventories) static at 99. , The forecast index (investment, sales, profitability and staff) increased to 102 from 100.75 last month. Anything less than 100 indicates a contraction.
The reported constraints were: 22% staff and markets 78%. Staff numbers for August increased year on year by 2.55%.
“This months results have reinforced the divide between the domestic and export economies. Export sales have continued to grow on the back of a weaker dollar while the domestic economy feels the pain of contraction. This is a manifestation of our policy settings, which exacerbate to the impact of falling interest and exchange rates and the liquidity crisis in global debt markets,” says NZMEA Chief Executive John Walley.
“The big jump in exports is not across the board, some substantial respondents have reported some huge increases, however, even when these are removed, we would still be reporting over a 40% increase in export sales.”
“The drop in the New Zealand dollar after the Official Cash Rate (OCR) cut in July started to come into affect in August, making exporting worthwhile again as forward cover works through. However, domestic contraction across the economy hurt local sales. The 50-point cut in September was too late for this survey, but troubles in the US will make the Kiwi dollar bounce around until the US politicians settle on a mechanism to deal with the toxic assets choking the credit markets.”
“Worries around the financial sector causing comments in the US such as, “if we don’t unblock credit markets, payrolls might not be met”, are creating a lot of uncertainty for the US and the world. Globally such comments will hit consumer confidence,” says Mr. Walley.
“The prospect of another 50-point OCR cut and the tax cuts in October may see some improvement in local consumer confidence, but the effects of the financial crisis elsewhere will also play a part. Changes to policy settings could buffer or further expose our economy; it will be interesting to see how much of an election issue this becomes.”
“More investment in export activity will follow better margins and profits, so we need to stabilise returns. Exchange rate stability and policies to promote long-term productive investments are needed to support our economy in a difficult world.”
“The financial crisis has shown that we need more focus on our export sector to reduce our exposure to foreign debt. Hopefully we will see some political leadership on this issue in the run up to the election.”
[Full results: mea031008.pdf]
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.