NZMEA Survey: Economic flat line
Economic flat line - 5 April
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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during March 2012, shows total sales in February 2012 increased 4.14% (export sales increased by 11.2% with domestic sales decreasing 0.83%) on February 2011.
The NZMEA survey sample this month covered NZ$515m in annualised sales, with an export content of 44%.
Net confidence remained level at +8.
The current performance index (a combination of profitability and cash flow) is at 101, the same as in January, the change index (capacity utilisation, staff levels, orders and inventories) increased to 104 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 103, down on January’s result of 106. Anything greater than 100 indicates expansion.
Constraints reported were 77% markets and 23% production capacity.
Staff numbers for February decreased year on year by 2.63%.
“Sales have had a slight upturn this month, but looking at the long-term trend it has been about four years now since we have seen any respectable numbers,” says NZMEA Chief Executive John Walley. “We have been bouncing along the bottom since 2008 and there are comments from respondents that conditions will get worse for manufacturers.”
“The exchange rate is the biggest concern with almost all respondents reporting it as the biggest threat to their business. Weakness in markets, rebuild issues in Christchurch and difficulties with the Ports of Auckland are also contributing to the adverse conditions.”
“Staff numbers continue to track downwards as firms look to keep costs down to deal with the uncertainty.”
“The production capacity constraint has increased this month and that reflects some transitional issues between buildings for those firms impacted by the earthquakes in Christchurch.”
“The underlying issue for the traded sector is the lack of investment in capacity expansion. Those firms that invested heavily five or so years ago have been burnt by the exchange rate, and while the same economic policy framework persists they will not be taking that risk again.”
“The Government must take a role in turning this around. As an OECD report last week stated small economies are hit harder exchange rate fluctuations than larger countries as the decision to export must come earlier in a firm’s development. Therefore, a fair and stable exchange rate must be a focus for the Government.”
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.