Domesitic Sales Leading Growth for Manufacturers

Domesitc Sales Leading Growth for Manufacturers - 11 July

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during June 2016, shows total sales in May 2016 increased 5.37% (year on year export sales increased by 1.43% with domestic sales increasing by 13.87%) on May 2015.

In the 3 months to May, export sales increased an average of 0.5%, and domestic sales increased 3.9%.

The NZMEA survey sample this month covered NZ$347m in annualised sales, with an export content of 66%.

Net confidence fell to 33, down from 40 in April.

The current performance index (a combination of profitability and cash flow) is at 102, up from 99 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 101, no change from the last survey, and the forecast index (investment, sales, profitability and staff) is at 104, up on the last result of 102. Anything over 100 indicates expansion.

Constraints reported were 44% markets, 28% production capacity, 17% skilled staff, and 11% capital.

A net 22.22% of respondents reported productivity increases for May.

Staff numbers for May increased 0.73% year on year.

Supervisors, tradespersons, managers, professional/scientists reported a moderate shortage and operators/labourers reported a minor shortage.

“May’s export sales moved back into year on year improvements, however modest, after a fall last month. On the 3 month average measure, exports remained slightly positive at 0.5%. Domestic sales showed a large year on year increase, 13.87% in May, a significant improvement on the 2.72% increase last month, and the year on year fall seen in March. May’s improvement moved the 3 month average up to 3.9%.” says Dieter Adam, Chief Executive of the NZMEA.

“The performance, forecast and change indexes all reported increases on April’s result and all were in expansion – manufacturers continue to implement changes and improvements in their businesses. However, the capital constraint was reported at the highest level since September 2014.

“Brexit has added more uncertainty into global markets, and has had immediate effects on our exchange rate, but the longer term effects are yet to be seen – in times of uncertainty orders can become more cautious, which could hit some New Zealand exports into the UK and EU.

“The currency continues to be reported as a risk in comments – our dollar has increased more than 5 cents on the Trade Weighted Index in the last month, to over 77. This is also about 5 cents above the level the RBNZ was forecasting for June in their last Monetary Policy Statement.

"We have now hit record highs against the British Pound, and our currency has gained significant ground against the Australian dollar, now sitting at very challenging levels for exporters. We need to see action from the Reserve Bank of New Zealand (RBNZ) to bring down our overvalued currency, in conjucntion with restrictions on housing investor lending and additional measures from Government to relieve the housing pressure that is tying the RBNZ's hands." said Dieter.

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