Conditions remain volatile for manufacturers

Conditions remain volatile for manufacturers - 6 November

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during October 2015, shows total sales in September 2015 increased 3.28% (year on year export sales increased by 0.06% with domestic sales increasing 12.1%) on September 2014.

The NZMEA survey sample this month covered NZ$314m in annualised sales, with an export content of 71%.

Net confidence rose to 23, up from 5 in August.

The current performance index (a combination of profitability and cash flow) is at 102.3, down from 111.0 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 97, down from 99 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104.83, down on the last result of 106.67. Anything over 100 indicates expansion.

Constraints reported were 77% markets and 23% skilled staff.

Net 38% of firms reported a modest fall in productivity in September.

Staff numbers for September increased 0.35% year on year.

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

“Export sales were flat in September, reporting no real change on the same month in 2014, although there were improvements on last month’s fall of 3.18%. Domestic turnover bounced back into year-on-year increases, at 12.1%, a stark difference to August’s decrease of 13%. This month represents some positive turn-around from a downward trend in recent months, but manufacturers and exporters are clearly still facing a lot of volatility. “says NZMEA Chief Executive Dieter Adam.

“Staff numbers were also flat in September and changes in sentiment measures were mixed. Confidence improved on last month, from 5 to 23 in September, while the performance, forecast and change index measures all saw reductions from their values in August.

“The only reported constraints were markets, moving up higher to 77%, and skilled staff, which hit 23%. The high market constraint value reflects the general level of volatility that has been felt, both in terms of market demand and in our exchange rate. The recent strengthening of the currency is of some concern, though there is hope this will continue back on its expected downward trend in coming months. This needs to be a priority in the Reserve Bank of New Zealand’s thinking in assessing conditions for their December interest rate review.

“The skilled staff constraint has only reached a value this high one other month since 2008 (March this year). This is in line with more anecdotal comments from member companies reporting challenges in finding skilled staff. This is an area that needs more focus - ensuring our education system is forward-looking and matches industry needs, businesses adopt good HR management practices and are supported to train and develop their staff. We also need to get much better at telling people about the opportunities for well paid, skilled employment in the sector." says Dieter.

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