No change despite “overvalued” dollar – 1 February

No change despite “overvalued” dollar – 1 February

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during January 2013, shows total sales in December 2012 decreased 5.35% (export sales decreased by 3.83% with domestic sales decreasing 6.62%) on December 2011.

The NZMEA survey sample this month covered NZ$556m in annualised sales, with an export content of 46%.

Net confidence fell to -14, down from the 0 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 101, down from 104.5 in November, the change index (capacity utilisation, staff levels, orders and inventories) went down to 97 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 101.75, down on November’s result of 104. Anything less than 100 indicates a contraction.

Constraints reported were 86% markets, 7% skilled staff and 7% production.

Staff numbers for December increased year on year by 1.89%.

“2012 ended on a negative note, both domestic and export sales fell year on year,” says NZMEA Chief Executive John Walley.

“Confidence fell, after a bit of a recovery in November. This is largely due the ever higher exchange rate. At the same time we see decreases on our composite indexes.”

“There is not really a lot of good news about at the moment, markets are soft and margins are squeezed by the exchange rate.”

“The Reserve Bank yet again chose to keep interest rates at 2.5%, despite the recognition that the dollar is overvalued. This is disappointing, as the recent low inflationary pressures have left room for a cut to boost growth and counteract some of the exchange rate appreciation. Their main concern, as always, was a house price bubble, but bereft of any supplementary instruments interest rates cannot do it all. Mutterings from the RBNZ on loan to value limits on lenders need to be front and centre.

“We do not share the RBNZ’s view that the coming year looks positive; the drought will crimp primary volumes and markets are very fragile; witness GDP numbers late last year in the USA.”

“The world is changing; Tobin (financial transaction) tax in Europe, the USA is targeting employment not inflation and the UK is in turmoil as the Bank of England goes through a change in Governor. It is still too early to say for certain but it appears that Mark Carney might be a breath of fresh air. We need some new thinking here in New Zealand.”

“Government is fixed in its views and is ambivalent about the exchange rate, regardless of what the world might be doing. The idea that the Christchurch rebuild will offer some relief is correct but we need to keep a sense of proportion; the NZ$30b rebuild impulse will be spread over a decade while exports amount to around NZ$60b each and every year.”

“The first day of the Manufacturing Inquiry made it clear that the top three things that matter to exporters is the exchange rate.”

ends

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