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Manufacturers still edgy

7 December 2008

Manufacturers still edgy

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during November 2009, shows total sales in October 2009 decreased 13% (export sales decreased by 20% with domestic sales decreasing 7%) on October 2008.

The NZMEA survey sample this month covered NZ$616m in annualised sales, with an export content of 44%.

Net confidence fell to -23, down from the -17 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 98.5, up from the previous month’s 98, the change index (capacity utilisation, staff levels, orders and inventories) went up to 101 from 95 last month, and the forecast index (investment, sales, profitability and staff) is at 103.8, up on the previous month’s result of 98.5. Anything less than 100 indicates a contraction.

The reported constraints were: production 23% and markets 77%.

Staff numbers decreased year on year by 13%.

“The mood has remained fragile among manufacturers and exporters in October. Confidence and sales have remained low,” says NZMEA Chief Executive John Walley. “That said the composite index numbers suggest that improvement may not be too far away and conversations with a number of firms indicate some patchy improvements.”

“The improving index numbers reflect a feeling that conditions are improving albeit off a very, very low base. Year on year numbers are still tracking downwards but better news from overseas, an encouraging cross rate with the Australian dollar, and some repeat orders all make for a better feeling in the run up to the year end.”

“There remains a stark contrast between the non-traded and traded economies with export sales declining further than domestic sales, and the strong improvement emerging from the housing market speaks to an unbalanced and unsustainable recovery.”

“Sales and staff have now declined for a sustained period causing a wind down of capacity; this means that any short term demand then leads to capacity problem as reflected in the capacity constraint reported. Investment continues to slow and firms are reluctant to invest when the returns are so uncertain; it will take some major changes to the policy framework before exporters commit to investment and growth.”

“Manufacturers and exporters continue to be disappointed by the Government’s inaction over policy reform. The Tax Working Group and the 2025 Productivity Taskforce have discussed our poor growth record, but the Government seems reluctant to engage in the discussion at this point. One thing is certain, unless the policy framework changes, investment by those operating in the tradeable sector will continue to slow and productivity growth will continue to fall. Our climb back up the OECD rankings can only get harder the longer we wait.”

ENDS

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