Expectations better than experience

Expectations better than experience

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The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during October 2014, shows total sales in September 2014 decreased 4.08% (year on year export sales increased by 13.54% with domestic sales decreasing 10.11%) on September 2013.

The NZMEA survey sample this month covered NZ$728m in annualised sales, with an export content of 30%.

Net confidence was at 32, up from 27 in our survey last month.

The current performance index (a combination of profitability and cash flow) is at 94.3, down from 97.3 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 106, up from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 108.67, up on the last result of 106.67. Anything less than 100 indicates a contraction.

Constraints reported were 59% markets, 18% skilled staff, 14% capital and 9% production capacity.

Net 14% of firms reported a modest rise in productivity for September.

Staff numbers for September increased year on year by 2.14%.

Tradespersons, supervisors, managers and operators/labourers reported a moderate shortage, while professional/scientists reported a minor shortage.

“This month’s results once again follow the trend for most of 2014: improving year on year export sales, with decreasing domestic sales,” says NZMEA Chief Executive John Walley.

“Confidence improved slightly on last month, while indexes were mixed. This month saw the market constraint measure bounce back from 47% in August, to 59% in September, reflecting continued soft domestic markets and uncertainty around the currency.”

“Recent trends in our index measures have shown the performance index, which takes into account profitability and cash-flow, has consistently been in negative territory during 2014. In contrast, the forecast index, which measures expectations around investment, sales, staff, profit and wages, has remained positive through 2014, as has the change index. This reflects a general sentiment throughout manufacturers in 2014, that although current conditions and performance are relatively weak, they expect conditions to improve.”

“The currency has improved around 14% since late July, encouraged by Reserve Bank of New Zealand (RBNZ) intervention, a lower for longer OCR and the Federal Reserve ceasing asset purchases, which all helps exporters and import competing manufacturers. The improved margins that come from a more balanced currency will be important, over time, to support the investment that will fuel future growth and innovation in the sector.”

“The currency continues to be characterised as “unjustified and unsustainable” by the RBNZ and we can hope that they continue to be active in this regard.”

“The recent lower than expected inflation results will also provide more room to move on future OCR decisions, allowing rates to be lower for longer, and potentially cut in future to spur growth and help to better balance our currency.”

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