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Short term improvements, structural concerns

Short term improvements, structural concerns – 5 July
For results tables and historical data click here.

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during June 2013, shows total sales in May 2013 increased 1.09% (export sales increased by 23.4% with domestic sales decreasing 12.1%) on May 2012.

The NZMEA survey sample this month covered NZ$501m in annualised sales, with an export content of 45%.

Net confidence rose to 33, up from the -9 result reported last month; however the “no change” respondents dominated the return.

The current performance index (a combination of profitability and cash flow) is at 104, up from 101 in April, the change index (capacity utilisation, staff levels, orders and inventories) went up to 105 from 100 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 103, up on April’s result of 99.75.  Anything less than 100 indicates a contraction.

Constraints reported were 67% markets, 17% production capacity and 17% skilled staff.

Staff numbers for May decreased year on year by 1.53%.

“Generally this survey reports an overall improvement, other than employment growth and domestic sales. This is a break from the declining trend established over recent months. The large jump in exports was due to concentrated increases rather than a broad based increase.   A big improvement in sentiment will be off the back of the fall in the exchange rate.  It is too soon for most to see any material fiscal improvement but things sure feel better.” says NZMEA Chief Executive John Walley.

“We can only hope the fall continues to a fair value and stays there, however few really believe that will happen, but for now, take what you can while it is going.”

“The experience of recent times is well established, other than the possibility of prudential intervention by the Reserve Bank not much has changed systemically, house prices and property asset speculation remain as a structural problem and political step too far.”

“Fundamentally, the currency is an unfettered hostage to events and remains a lottery.  Remember not too long ago commentary had the USD NZD cross at 90 cents.  Don’t expect too much investment while this structural problem remains.”

“Recent Statistics New Zealand data showed the value of exported goods decreased by 7.8% year on year in May.  GDP figures for the March quarter showed an increase of 0.3% on the previous quarter, with manufacturing showing a very modest increase of 0.2% however machinery and mechanical appliance exports, which are a significant part of elaborately transformed classification, have been falling since the third quarter of 2011.”

“Generally, elaborate manufacturing has not grown over the last decade.  This needs to change in order to increase our economic complexity and general wealth; becoming less diverse and less complex and relying more on primary production is not a recipe for sustainable economic success. “

“As always it is important that to focus on the underlying trends in the numbers, rather than latching on to single results as a sign of growth or decline.”

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.


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