Sales growth starts to stall
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during November 2010, shows total sales in October 2010 increased 3% (export sales decreased by 4% with domestic sales increasing 7%) on October 2009.
The NZMEA survey sample this month covered NZ$522m in annualised sales, with an export content of 29%.
Net confidence rose to 0, up from the -11 result reported last month.
The current performance index (a combination of profitability and cash flow) is at 102.5, up from 99.5 in September, the change index (capacity utilisation, staff levels, orders and inventories) was steady at 100, and the forecast index (investment, sales, profitability and staff) is at 107, up on September’s result of 103.5. Anything less than 100 indicates a contraction.
Constraints reported were 80% markets and 10% skilled staff and 10% capital.
Staff numbers for October decreased year on year by 1%.
“Sales growth stalled in October as the rise in the New Zealand dollar hit the tradeable sector,” says NZMEA Chief Executive John Walley. “Low margins due to the currency pressure and worries that the world economy is showing few signs of a sustained recovery are the main concerns expressed by our respondents.”
“The currency lottery remains the overriding issue for manufacturers and exporters. Even firms who are able to cope with the currency at these elevated levels are concerned because there is simply no good reason for the currency to be where it is today, so it might be anywhere tomorrow – returns from export efforts have become completely unpredictable.”
“Add market uncertainty to an unpredictable and overvalued currency and investment in capacity expansion and associated job growth are a long way off.”
“Our members find it impossible to reconcile the statements from the Government and its officials that our economy needs to rebalance with their inaction on the currency problem. The policy loose end that is the exchange rate requires management not indifference. The high value-add exporters get hit hardest by currency fluctuations, yet these are exactly the businesses that New Zealand needs to create a high wage economy.”
“The concerns expressed by Standard and Poor’s and the Treasury about New Zealand’s debt position make policy changes all the more urgent. As Treasury Secretary John Whitehead mentioned, the only factor separating New Zealand from countries requiring bailouts such as Ireland and Greece is relatively low levels of Government debt, but the longer the Government has to stimulate the economy in the absence of private sector investment the worse the public debt situation becomes.”
“We need to see measures to lower the uncertainty faced by the tradeable sector. Only growth in the tradeable sector will get us out of this slump; that means managing the exchange rate, saving more and taxing assets and income equally.”
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