NZMEA Survey - February 2017 - Mixed bag for manufacturing sales, but R&D spending up
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions, completed during March 2017, shows total sales in February 2017 decreased 9.79% (year on year export sales decreased by 16.34% with domestic sales increasing by 4.09%) on February 2016.
In the 3 months to February, export sales decreased an average of 3.4%, and domestic sales increased 2.2% on average.
The NZMEA survey sample this month covered NZ$249m in annualised sales, with an export content of 63%.
Net confidence rose to 0, up from -7 in January.
The current performance index (a combination of profitability and cash flow) is at 98.3, down from 101.3 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 100, down from 101 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 106.33, up on the last result of 105.3. Anything over 100 indicates expansion.
Constraints reported were 90% markets and 10% skilled staff.
A net 23% of respondents reported a productivity increase in February.
Staff numbers decreased 5.99% year on year in February.
Supervisors, tradespersons, managers, professional/scientists and operators/labourers reported a moderate shortage.
“Export sales had another month of year on year decreases, falling 16.34% on February 2016. Though it is worth noting that February 2016 was the strongest month for export sales in 2016, meaning the relative fall for this month is less concerning than it otherwise would be.” Said NZMEA Chief Executive Dieter Adam.
“Domestic sales improved 4.09% on a solid February 2016, with an average year on year increase in the last three months of 2.2%. Staff numbers took a hit for again, marking the 6th month in a row of falling staff numbers. The reasons for this drop aren’t clear from our survey; it may be related to the export numbers, or simply positions that manufacturers are struggling to fill with appropriate skills. The skilled staff constraint was at 10%, while the market condition constraint was very high at 90%.
“In the recent Research and Development Survey by Statistics New Zealand, in 2016, spending on R&D by the manufacturing sector increased 28.5% on 2014, while machinery and equipment manufacturing increased 36.6%.
“While the contribution of manufacturing on R&D spending increased, our R&D spending as a percentage of GDP remains woefully low when compared to the OECD average and countries we compete with. Our total R&D spending as a percentage of GDP was 1.28%, compared to the OECD average of 2.4% of GDP.
“The Government needs to explore ways to further support R&D activities, including looking seriously at reintroducing R&D tax credits and accelerate depreciation on productive plant and equipment, to help manufacturers and other businesses keep up with the rapid pace of change in technology.” Said Dieter Adam.
The New Zealand Manufacturers and Exporters Association survey gathers results from members around New Zealand. It provides a monthly snapshot of manufacturers and exporters’ sales and sentiment.