Sales hold, but outlook still shaky

4 March 2009

Sales hold, but outlook still shaky

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during February 2009, shows total sales in January 2009 increased 0.93% (export sales increased by 7.3% with domestic sales decreasing 3.0%) on January 2008.

The NZMEA survey sample this month covered NZ$425m in annualised sales, with an export content of 41%.

Net confidence rose to -54, up from the -73 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 90.5, down from the previous month’s 96, the change index (capacity utilisation, staff levels, orders and inventories) went down to 94 from 96 last month, and the forecast index (investment, sales, profitability and staff) is at 88, down on the previous month’s result of 91.3.  Anything less than 100 indicates a contraction.

All respondents reported markets as their most significant constraint.

Staff numbers for January decreased year on year by 5%.

“Sales revenue held up last month despite declining index numbers and continuing concerns over markets,” says NZMEA Chief Executive John Walley.  “With the lower dollar exporters are getting larger margins but volumes are dropping.  Poor local demand has resulted in reduced domestic sales.”

“Unfortunately we have seen lower volumes translate into fewer staff.  With the index numbers indicating that staff levels and investment are likely to track down further in the immediate future, this trend has the potential to continue.  This is a concern not only for the short-term, but may also lower production capacity over the medium-term.”

“Overall confidence has risen again but it is worth noting there was still very little positive sentiment.  The confidence rating has now been in negative territory for a full year, which is a worrying sign given that investment in the tradeable sector is usually the spark to pull the country out of recession.”

“As interest rate cuts, tax cuts and a raft of stimulus measures feed through into the global and local economy, a reset in the minds of consumers becomes important so that some of the money is spent, rather than being used to retire debt or increase savings.”

“The job summit will help build this confidence if real and concrete results follow through from the ideas.  We now need to see the next stage - forming solid proposals on how productive firms can continue to create jobs, as well as how to manage and minimise job losses.”

The New Zealand Manufacturers and Exporters Association survey gathers results from members around New Zealand.  It provides a monthly snapshot of manufacturers and exporters’ sales and sentiment.

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