Sales slump in some sectors

3 April 2009

Sales slump in some sectors

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during March 2009, shows total sales in February 2009 decreased 25.0% (export sales decreased by 15.9% with domestic sales decreasing 30.9%) on February 2008. Falls were heavily concentrated in building supply chains.

The NZMEA survey sample this month covered NZ$504m in annualised sales, with an export content of 44%.

Net confidence rose to -42, up from the -54 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 94, up from the previous month’s 90.5, the change index (capacity utilisation, staff levels, orders and inventories) went down to 92 from 94 last month, and the forecast index (investment, sales, profitability and staff) is at 90.3, up on the previous month’s result of 88. Anything less than 100 indicates a contraction.

Demand was the only reported constraint.

Staff numbers year on year from February 2008 to February 2009 fell by 6.85%.

“The headline shows an alarming drop in sales in February,” says NZMEA Chief Executive John Walley. “The major falls are in specific areas like building and automotive supply chains, however, more generally others are showing less negative impact from the turmoil in the world.”

“Prospects for a recovery in sales generally are indeterminate, particularly with margins again under attack from the recent surge in the exchange rate making conditions more precarious for exporters. The less than anticipated OCR cut in March, coupled with the quantitative easing elsewhere, make further substantial cuts in interest rates essential to take the speculative pressure off the dollar.”

“The reduction in staff numbers suggests that manufacturers expect to be running at reduced capacity for an extended period. Predictably markets have remained the dominant constraint.”

“The upside of these results is that confidence has risen slightly again and two out of the three index numbers have risen, but it is worth noting that confidence is still heavily negative and the index numbers are still in contraction territory.”

“It is difficult to predict when overseas markets will recover with the extreme measures introduced by the United States and the United Kingdom drawing mixed reactions. There is also concern with some developing economies in Eastern Europe having to be bailed out by the International Monetary Fund (IMF).”

“Domestically the situation needs to be taken more seriously. A record current account deficit and poor GDP figures have spelt out the extent of our problems. We now need to see an end to the ‘keeping our powder dry’ mentality; it might just be when the time comes to pull the trigger there will be nothing to shoot at.”

“Minimal interest rate cuts and the Reserve Bank buying New Zealand dollars do little to support our exporters.”

“So let’s not waste a good crisis; long term export development needs investment, and more investment will follow structural changes around balance in the tax base and a more effective way to deal with inflationary pressure in the internal sector.”

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.

ENDS

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