Record dollar stifles growth - 3 June

Record dollar stifles growth - 3 June

Historical survey data can be found here www.realeconomy.co.nz/178-record_dollar_level_stifles_gr.aspx.

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during May 2011, shows total sales in April 2011 decreased 3% (export sales increased by 11% with domestic sales decreasing 9%) on April 2010. The NZMEA survey sample this month covered NZ$395m in annualised sales, with an export content of 36%.

Net confidence rose to 13, up from the -10 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 99.5, down from 100.5 in March, the change index (capacity utilisation, staff levels, orders and inventories) went down to 102.25 from 103.25 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 103, up on March’s result of 102. Anything less than 100 indicates a contraction.

Constraints reported were 37.5% markets, 25% production capacity, 25% skilled staff and 12.5% capital.

Staff numbers for April increased year on year by 0.3%.

“The exchange rate is at a record high against the US dollar and this is threatening the viability of some of our high end exporters,” says NZMEA Chief Executive John Walley.

“It is vital that we see some action from the Government and the Reserve Bank on this to ease the pressure.”

“It is irresponsible to paint this as just a US dollar story; our dollar has reached a three year high against the Trade Weighted Index. The cross rate with Australia is some good news but we should be looking to expand export markets not narrow them to the few countries which have viable cross rates.”

“Manufacturers exporting for Australian consumption are doing well but for those selling pass through intermediate products, volumes are falling as the high Australian cross with the USA is damaging Australian manufacturers.”

“There has been a pick-up in confidence from the past few months indicating that there has been some improvement in trading conditions. It has also been noted that while large corporates are spending again there is less activity from smaller companies.”

“There is still some distraction and disruption from the Canterbury earthquake. Feedback on slow action from insurance companies is beginning to show. Firms are struggling to get all of their material damage fixed before their Business Interruption Insurance runs out. There are also problems attracting staff with little interest in working in Christchurch and pressure on low wage jobs with unskilled labour getting paid higher wages in deconstruction projects.”

“The overriding message from manufacturers and exporters is that the persistent overvaluation and volatility of the currency must be dealt with. We expect to see political parties detailing their policy approach to the currency problem in the next electoral term in the lead up to the election. The required rebalancing will never occur without the exchange rate being addressed.”

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