Sales improve off low base - 5 July

Sales improve off low base - 5 July

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during June 2011, shows total sales in May 2011 increased 15% (export sales increased by 22% with domestic sales increasing 10%) on May 2010.

The NZMEA survey sample this month covered NZ$382m in annualised sales, with an export content of 45%.

Net confidence fell to -33, down from the 13 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 102, up from 99.5 in April, the change index (capacity utilisation, staff levels, orders and inventories) went down to 102 from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 101.75, down on April’s result of 102.25. Anything less than 100 indicates a contraction.

Constraints reported were 67% markets, 22% production capacity and 11% capital.

Staff numbers for May increased year on year by 1.8%.

“We are starting to see a recovery in sales after the large drop in sales seen during the economic crisis and a period of bouncing along the bottom since,” says NZMEA Chief Executive John Walley.

“The recovery shows some pick up in markets offshore from depressed levels in the past couple of years and we have started to see some growth in the number of firms reporting capacity and capital as constraints. The Christchurch earthquakes are a contributing factor to production capacity problems.”

“The exchange rate remains a problem and it continues to suppress investment and any stronger recovery in export returns even at increased sales levels.”

“We have seen the impact of this with KiwiRail sourcing rolling stock from China National Rail rather than local manufacturers. A competitive exchange rate would have seen this work remain in New Zealand. Effectively the Government is choosing short-term spending power over long-term jobs and capacity development by completely ignoring the exchange rate in its Policy Targets Agreement with the Reserve Bank.”

“Lower confidence and index ratings indicate that respondents are very concerned about the fragile recovery in the United States and Europe and there are also concerns about the persistence of strong growth rates in China and Australia.”

“Christchurch manufacturers are continuing to report some difficulties getting insurance payments with some still waiting on business interruption payments from February.”

“More generally a supportive policy framework for the tradable sector is needed to maximise earnings and encourage investment if the demand increase is sustained.”

“Global markets remain uncertain, a more competitive exchange rate and other fiscal incentives are needed to encourage investment in the tradable sector.”

ENDS

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