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Better, but currency a worry

- 4Better, but currency a worry

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during March 2014, shows total sales in February 2014 increased 9.16% (year on year export sales increased by 14.87% with domestic sales increasing 3.99%) on February 2013.

The NZMEA survey sample this month covered NZ$406m in annualised sales, with an export content of 50%.

Net confidence was at 35, up on January’s result of 21.

The current performance index (a combination of profitability and cash flow) is at 98.7, unchanged from January, the change index (capacity utilisation, staff levels, orders and inventories) was at 105, up from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 107.67, up on Januarys result of 107.17. Anything less than 100 indicates a contraction.

Constraints reported were 59% markets, 24% production capacity and 18% skilled staff.

Net 65% of firms reported a modest rise in productivity for February.

Staff numbers in February decreased year on year by 0.19%.

All staff segments, tradespersons, operators/labourers/ supervisors, managers and professional/scientists, reported a moderate shortage for February.

“This month’s survey shows a general improvement on nearly all measures other than the small decrease in staff numbers.”

“We have now seen the first, of several, OCR increases by the Reserve Bank of New Zealand (RBNZ) despite our overvalued currency. Following this increase we have seen the dollar reach new post float highs on the Trade Weighted Index (TWI). The RBNZ was clear about their traffic light system for judging whether currency intervention is warranted, shedding further crocodile tears and admitting to deliberately deflating the tradeable sector in line with the tightening bias in monetary policy – we have seen all this before.”

“Interest rates are a blunt tool and fail to target inflation at the source in our domestic economy; the traded sector is not the source of inflation but deflation there does lower theheadline result.”

“As this trend continues the tradable sector will continue to cease operation in New Zealand, through closure or relocation, and our economy will regress to the export of minimally processed raw materials. There is not much added value in that strategy. We need to think beyond milk powder and logs.”


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