Survey - Pride or Prudence?
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during June 2010, shows total sales in May 2010 increased 9.8% (export sales increased by 9% and domestic sales increasing 10%) on May 2009.
The NZMEA survey sample this month covered NZ$347m in annualised sales, with an export content of 41%.
Net confidence rose to 50, up from the 46 result reported last month but locked in the ‘no change’ and ‘modest rise’ categories.
The current performance index (a combination of profitability and cash flow) is at 104.5 up from 102.5 in April, the change index (capacity utilisation, staff levels, orders and inventories) went up to 105 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 105, down on April’s result of 108.25. Anything less than 100 suggests a contraction.
Constraints reported were 70% markets and 10% each on capacity, capital and staff.
Staff numbers for May increased 3%. It is the first time the survey has reported an increase in employment since November 2008!
“This is probably the most positive survey we have seen since the onset of the global financial crisis,” says NZMEA Chief Executive John Walley, “that said, the recovery is fragile, patchy and far from bedded in.”
“The broadening of the constraints is a further indication that, right now at least, demand is stronger. Our forward looking index has softened in line with reports of softening export markets, but for the present sales have improved on last year and job growth is reported for the first time.”
“When I look back at the net confidence numbers our survey was in deep negative territory from early 2005, which turned on trend earlier this year. That growth will have to continue for a while yet before we start to see any real investment kick in.”
“We have long been of the view that, frothy confidence numbers aside, jobs and sales are better measures of where the world is at. On those measures June was too early for the Reserve Bank to increase interest rates; we remain of the view that September this year is the earliest practical date to even consider a shift in monetary policy.”
“Pessimistic reports from other commentators in New Zealand; continued concerns in our financial sector; lower for longer messages from the Federal Reserve; a no change out of the Reserve Bank of Australia, and an Australian election in prospect; significant budget cuts in the UK; on-going European worries; and more appreciation of the RMB and other economic worries out of China - all encourage a wait and see position.”
“Pride should not win out over prudence. The RBNZ should signal lower for longer on interest rates and indicate the favoured route will be to use macroprudential efforts to press back against any inflation concerns for the foreseeable future.”
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