Manufacturing sales fall again.

1 May 2009

Manufacturing sales fall again.

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during April 2009, shows total sales in March 2009 decreased 40.3% (export sales decreased by 30.9% with domestic sales decreasing 45.6%) on March 2008.

The NZMEA survey sample this month covered NZ$530m in annualised sales, with an export content of 42%.

Net confidence remained at -42.

The current performance index (a combination of profitability and cash flow) is at 89.5, down from the previous month’s 94, the change index (capacity utilisation, staff levels, orders and inventories) went down to 91 from 92 last month, and the forecast index (investment, sales, profitability and staff) is at 96.8, up on the previous month’s result of 90.3. Anything less than 100 indicates a contraction.

The reported constraints were: 8% staff and 92% markets.

Staff numbers for March decreased year on year by 12.9%.

“Again, year on year sales fell dramatically,” says NZMEA Chief Executive John Walley. “The domestic sector has shown the largest fall but broadly the results are bad across the board reflecting the global nature of the crisis.”

“Staff numbers have also decreased around 13%. Up to early 2009 staff numbers had been holding up, even increasing, but it seems the slide in demand is now translating into a reduction in capacity and a loss of jobs.”

“Comments from manufacturers suggest a real fall in demand between 40% and 60% - that does not bode well for capacity increases any time soon.”

“The Reserve Bank of Australia Governor has reported that Australia is now in recession and China’s growth rate is slowing markedly so there is little good news in our export markets. This has played out in the performance index which has dropped significantly.”

“One positive indicator is the forecast index which has improved significantly suggesting that there may be some light at the end of the tunnel, albeit dim and distant.”

“Domestically we need to take this opportunity to tackle some intractable issues that have affected our economic performance for some time. In particular we need to see the Government take some real action to move towards their stated goal of increasing exports as a percentage of GDP – it will take more than minor cosmetic changes to the grant framework to achieve this.”

“It is time to get serious; the variability in the exchange rate is the most urgent matter as the recent spike over 58 cents has demonstrated. It is becoming increasingly clear that the RBNZ needs other tools to achieve broader price stability. If the exchange rate continues to fluctuate to the extent we have seen in the past few years it is difficult to anticipate investment from exporters, and subsequently, a sustained export led recovery.”

For further comment contact John Walley, 03 353 2545, or 021 809 631.

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.

NEW ZEALAND MANUFACTURERS AND EXPORTERS ASSOCIATION
Survey of Business Conditions – March 2009 compared with March 2008

SAMPLE SIZE: The Survey respondents represent elaborate transformed manufacturers with annual sales of approximately $530 million.

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages)
March February
TOTAL TURNOVER: Export /Domestic ratio 42/58 44/56
% Change in Total Turnover DECREASED -40.32 -24.98

DOMESTIC TURNOVER: % of respondents reporting a rise 18 36
% of respondents reporting a fall 81 54
% of respondents reporting no change 0 9
% Change in Ave Domestic Turnover DECREASED -45.61 -30.87

EXPORT TURNOVER: % of exporters reporting a rise 36 27
% of exporters reporting a fall 63 63
% of exporters reporting no change 0 9
% Change in Average Export Turnover DECREASED -30.88 -15.9

STAFF NUMBERS: % of respondents reporting a rise 25 36
% of respondents reporting a fall 66 36
% of respondents reporting no change 8.33 27
% Change in Average Staff Numbers DECREASED -12.93 -6.85

CHANGE OVER 12 MONTH PERIOD
(The table below represents the above returns expressed as percentages.)

Large Fall
(Over 15%) Modest Fall
(2.5%-15%) No Change
(Within 2.5%) Modest Rise
(2.5%-15%) Large Rise
(Over 15%)
Mar Feb Mar Feb Mar Feb Mar Feb Mar Feb
Profitability (YoY) 67 33 8 25 8 17 0 17 17 8
Cashflow (YoY) 25 25 33 17 25 33 17 25 0 0
Exchange Rate (YoY) 17 17 25 8 25 25 33 33 0 17
Investment Forecast 25 42 25 8 33 33 0 17 17 0
Sales Forecast 8 42 33 17 25 33 25 8 8 0
Profit Forecast 8 17 42 50 33 17 8 17 8 0
Staffing Forecast 0 25 42 42 50 33 0 0 8 0
Very
Negative Negative Neutral Positive Very
Positive
Confidence 8 8 50 50 25 25 17 17 0 0
Constraint Production Skilled Staff Capital Market
0 0 8 0 0 0 92 100

Net Confidence Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2004 +5 +19 +41 +41 +36 +50 +12 +20 +7 0 -7 +5
2005 +13 -13 -6 -25 -33 -13 -13 -36 -27 -32 -29 -33
2006 -47 -13 -23 -29 -42 -13 -14 +8 +15 -7 40 0
2007 -17 0 -8 25 8 -17 -60 -18 +8 0 -8 -9
2008 +8 -10 -36 -33 -40 -55 -33 -22 -91 -82 - -73
2009 -54 -42 -42

Index
(base =100) Feb 08 Mar 08 Apr 08 May 08 Jun 08 July 08 Aug 08 Sept 08 Oct
08 Nov 08 Dec
08 Jan 09 Feb 09 Mar 09
Performance 97.5 98.5 98 100 93 98.5 97 92.5 88.5 - 96 90.5 94 89.5
Forecast 104.25 101 99.75 101 98 100.75 102 95 92.25 - 91.25 88 90.25 96.75
Change 102 100 100 100 99 99 99 98 96 - 96 94 92 91

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