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Performance and Expectations Soft

Performance and Expectations Soft - 21 December

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during December 2012, shows total sales in November 2012 increased 2.86% (export sales increased by 20.3% with domestic sales decreasing 6.42%) on November 2011.

The NZMEA survey sample this month covered NZ$543m in annualised sales, with an export content of 41%.

Net confidence came out at 0, up from the -18 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 104.5, up from 93.5 in October, the change index (capacity utilisation, staff levels, orders and inventories) went up to 102 from 96 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104, up on October’s result of 98.5. Anything less than 100 indicates a contraction.

Constraints reported were 73% markets, 9% production capacity and 18% skilled staff.

Staff numbers for November decreased year on year by 0.5%.

“A bit of a mixed bag; employment down, composite index up on the month for the first time since mid-year and sales in positive territory but less than last month. Overall trends are close to zero and with the inexorable appreciation of the currency you would have to be an unrestrained optimist to draw a lot of festive cheer from this survey.” said NZMEA CEO John Walley.

“It looks like December results will not show any real change to this picture. Markets are slow and the further currency strengthening following the do-nothing November Monetary Policy Statement will take yet more shine off the margin from the sales that are made.”

Recent Treasury reports indicate a contraction in the current account deficit at 4.7% of GDP. But the long run trend is set to see the deficit increase next year. Balancing the current account needs much more Government focus.

Generally, manufacturing decreased by 1.1% in the September 2012 quarter say Statistics New Zealand. Overall GDP growth was low at 0.2% and construction, off a very low base, increased 4.5%.

“The September quarter is soft and our more recent indicators suggest the December quarter will be the same; we need the export sector to fire, but sadly our currency appreciation puts it out.”

“While some manufacturers are seeing increased turnover, most are seeing margin pressure and the overall picture is soft. Manufacturing and the export sector matters, and Government needs to show some real intent to address the structural currency issue.”

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