April exports fall, mixed feelings from manufacturers

31 August 2016

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during May 2016, shows total sales in April 2016 decreased 2.97% (year on year export sales decreased by 5.36% with domestic sales increasing by 2.72%) on April 2015.

In the three months to April, export sales increased an average of 24.8%, and domestic sales increased 2.2%.

The NZMEA survey sample this month covered NZ$311m in annualised sales, with an export content of 69%.

Net confidence rose to 40, up from 33 in March.

The current performance index (a combination of profitability and cash flow) is at 99, down from 103.33 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 101, down from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 102, down on the last result of 107. Anything over 100 indicates expansion.

Constraints reported were 53% markets, 20% skilled staff, 20% production capacity, and 7% capital.

A net 46.67% of respondents reported productivity increases for April.

Staff numbers for April increased 2.68% year on year.

Operators/labourers, tradespersons and, managers, professional/scientists reported a moderate shortage and supervisors reported a minor shortage.

“April showed a decrease in year on year export sales, following a great start to 2016. Even with this fall, the three month average of export sales remains high at 24.8%. Domestic sales increased year on year by 2.7% in April, which is positive after the decrease seen in March. The three month average for domestic sales stayed positive at 2.2%.” says Dieter Adam, Chief Executive of the NZMEA.

“Sentiment measures were mixed this month, with confidence improving, but the index measures of performance, forecast and change, all falling on March results. Skilled staff has also increased significantly as a reported constraint to growth, moving from 6% in March, to 20% this month.

“The recent budget announcement has some positive notes on skills development and apprentices, as well as for innovation, but we would have liked to see a bigger focus on R&D within businesses. Preferably through R&D tax credits, which has a wider scope for encouraging and supporting R&D spending by manufacturers.

“In addition, we would still like to see more action on the housing front, to tackle both the demand and supply sides. Recent data from the RBNZ showing investors making up 46% of mortgages in Auckland in April highlights the need to better balance the investment and tax incentives involved. It is great to see the RBNZ look into debt-to-income measures.

“The Reserve Bank of New Zealand (RBNZ) held the OCR today, despite a currency that has risen two cents on a TWI basis this month. They noted the level of the currency remains higher than appropriate and that a lower dollar would assist the tradable sector.

“Manufacturers and exporters need the downward trend to a fairer level to continue, rather than these movements in the opposite direction. The RBNZ’s hands cannot be tied by housing inflation when making monetary policy decisions that affect our exchange rate and manufacturers and exporters competitiveness.” Said Dieter.