The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during February 2010, shows total sales in January 2010 decreased 3% (export sales decreased by 32% with domestic sales increasing 15%) on January 2009.

The NZMEA survey sample this month covered NZ$452m in annualised sales, with an export content of 28%.

Net confidence rose to 45, well up from the -11 result reported last month.

The current performance index (a combination of profitability and cash flow) is at 100.5, down from 101.5 in December, the change index (capacity utilisation, staff levels, orders and inventories) rose to 99 from 98 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104.5, up on December’s result of 101. Anything less than 100 indicates a contraction.

Markets were the only reported constraint.

Staff numbers for January 2010 decreased year on year by 13%.

“Confidence has turned positive this month after two years in negative territory but that will be little comfort until sales and jobs start to pick up,” says NZMEA Chief Executive John Walley. “There are reports of markets starting to improve but there is still a fair way to go to get back to normal. A persistent concern is the exchange rate which continues to hit profitability even in industries where sales have improved.”

“A lower cross rate and continued growth in the Australian economy will help manufacturers selling to Australia, particularly if they buy materials in US dollars. Overall markets are still soft and remain the only reported constraint. Europe is particularly weak.”

“Better index numbers show that things might improve, but it is not the ‘v’ shaped recovery we had hoped for.”

“Lower sales and a drop in staff numbers show that, at best, we are bumping along the bottom.”

“Working papers released by the International Monetary Fund this month have reinforced the messages that the Government has been receiving for some time on management choices for the economy and currency issues. ‘Strict inflation targeting is not optimal’ is a pretty clear message. Unfortunately this advice looks like it has fallen on deaf ears.”

“The medium term outlook will remain gloomy while the Government refuses to address the imbalances in the economy. The foreshadowed tax changes demonstrate that even if the needs of the tradeable sector are understood, they are being ignored.”