NZMEA Survey July 2016 - Signs of Challenges for Exporters

6 September 2016

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2016, shows total sales in July 2016 decreased 15.27% (year on year export sales decreased by 20.48% with domestic sales decreasing by 6.03%) on July 2015.

In the 3 months to July, export sales decreased an average of 6.5%, and domestic sales increased 2.6%.

The NZMEA survey sample this month covered NZ$337m in annualised sales, with an export content of 60%.

Net confidence fell to 6, down from 20 in June.

The current performance index (a combination of profitability and cash flow) is at 98.7, down from 99 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 100, up from 99 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 107, up on the last result of 105.33. Anything over 100 indicates expansion.

Constraints reported were 75% markets, 12.5% production capacity and 12.5% capital.

There was no net reported productivity increases for July.

Staff numbers for July decreased 0.15% year on year.

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

“Year on year export sales have moved from their slight fall last month, to a more significant decrease of 20.48% in July. This result solidified the downward trend shown in the 3 month moving average of export sales, now sitting at -6.5%. Domestic sales also fell in year on year terms, though to a smaller extent than exports. Year on year domestic sales fell 6.03% in July, resulting in monthly average growth of 2.6% for domestic sales over the last 3 months.” Said Dieter Adam.

“There are clearly some challenges appearing in sales terms for manufacturers, particularly in export markets. The profitability measure gained ground in the latter half of 2015, but has since been trending downward. After moving somewhat lower during 2016, the market constraint has now moved to its highest level since December 2015. This may indicate, along with falling the profitability and export sales, that the pressure of the exchange rate is building on manufacturers – our currency has trending up this year, moved up 9 cents since late 2015 on the Trade Weighted Index. The exchange rate and increased competition from imports was noted as a concern by a number of respondents.

“Confidence fell in July, along with two of the index measures, profitability and change. However, in contrast, the forecast index increased again on last month, and remains high at 107. Within the forecast index, was a strong positive result for investment plans. Despite this month’s sales results, and lower confidence, there remains a relatively positive view for the future among manufacturers.” Said Dieter.