Business Conditions Survey: Agenda for Change
30 January 2008
“Agenda for Change”.
The latest Canterbury Manufacturers’ Association (CMA) Survey of Business Conditions completed during January 2008, shows total sales in December 2007 increased 16.6% (export sales increased by 12% with domestic sales increasing 21.77%) on December 2006.
The CMA survey sample this month covered NZ$425m in annualised sales, with an export content of 51%.
Net confidence dropped to -10, down from the -8 result reported last month.
The current performance index (a combination of profitability and cash flow) is at 97.5, up from the previous month’s 97, the change index (capacity utilisation, staff levels, orders and inventories) decreased to 99 from the previous months 104, and the forecast index (investment, sales, profitability and staff) is at 104.2, down on the previous month’s result of 106. Anything less than 100 indicates a contraction.
Constraints reported 18% production, 18% staff and markets 64%.
Staff numbers for December increased by just over 4.8%.
“December’s results are very similar to the previous month in that short term results are showing improvement in the manufacturing sector yet confidence continues to drop. This survey also shows a drop in the index change below 100 for the first time since April 2007. The sentiment around this survey is that in the short term, things are OK with some respondents saying that orders and sales numbers are improving early in the New Year. However further out our respondents foresee problems, due to high interest rates, strong dollar, the gap between the two economies and the possible impacts of the global credit crunch”, says Chief Executive John Walley.
“Respondents report that they do not expect the OCR to be lowered this year and already this year, the NZD has pushed back towards the USD.80 mark. This cycle will continue to have the inevitable effect on exporters. Humanware has announced its relocation plans and the Reefton sawmill has said it is closing in March. These announcements show that both elaborate and basic manufacturers are under pressure. The losses will further impact on local supply chains, skills base and the loss of Humanware further illustrates the fallacy in the argument that you can lose production yet generally retain R&D indefinitely”.
“Although the indicators are showing that 2008 will be a repeat of last year, we hope that policy makers will embrace an ‘Agenda for Change’ in election year and provide policy support for firms investing in new equipment, developing new products and investment in overseas markets. Policies need to change so that the New Zealand economy operates with differences between inflation and the base interest rate closer to the OECD average, otherwise we can anticipate a protracted and artificially high exchange rate as global liquidity chases New Zealand’s higher interest rates laying waste to returns for our exporters”.
In an election year, the prospect of yet more “buy now pay later policy” looms large – but it does not have to be that way, we can change”.