What matters most, sales or sentiment?

What matters most, sales or sentiment?

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during September 2013, shows total sales in August 2013 decreased 5.56% (export sales decreased by 9.33% with domestic sales decreasing 1.20%) on August 2012.

The NZMEA survey sample this month covered NZ$445m in annualised sales, with an export content of 52%.

Net confidence rose to 18, up from the 9 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 100.7, down from 104.7 in July, the change index (capacity utilisation, staff levels, orders and inventories) was at 102, the same as in the last survey, and the forecast index (investment, sales, profitability and staff) is at 105, up on July’s result of 104.33. Anything less than 100 indicates a contraction.

Constraints reported were 64% markets, 27% production capacity and 9% skilled staff.

Staff numbers for August increased year on year by 0.58%.

“Sales are contracting, month on month and on trend. There is a two speed situation developing, domestic New Zealand is doing better than export New Zealand.”

“That said, confidence is holding up and there were a number of positive comments from those with a strong sales bias into the domestic market. A different tone is developing from those with a large dependence on export sales with the recent rebound in the US$ cross rate.”

“More generally the numbers suggest manufacturers and exporters are still lagging behind other sectors which seem to feel a stronger improvement – a two speed economy.”

“An overvalued and volatile currency which has been down and back up again in the past quarter hurts margins over time; this is a major barrier for exporters and import competing manufacturers. The situation is not helped as it looks like New Zealand is set to be the first developed country to raise interest rates next year; this will add upwards pressure on the dollar while increasing borrowing costs.”

“We need to see more policy directed at house price inflation that seeks to avoid exchange rate pressures. Loan to value limits (LVR) have been a step in the right direction, but more could be used. Anyone remember borrowing to income limits? Such policies are an important step in protecting our financial stability.”

“The difference between the actual sales numbers reported against the sentiment measures and comments seems to be growing. We will need to watch how this develops; over reliance on sentiment measures from a feel good domestic economy has its problems.”

ends

© Scoop Media