The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during June 2012, shows total sales in May 2012 increased 8.05% (export sales decreased by 0.58% with domestic sales increasing 13.8%) on May 2011.

The NZMEA survey sample this month covered NZ$530m in annualised sales, with an export content of 37%.

Net confidence rose to 18, up from 9 last month.

The current performance index (a combination of profitability and cash flow) is at 102.5, up from 101 in April, the change index (capacity utilisation, staff levels, orders and inventories) remained steady at 101, and the forecast index (investment, sales, profitability and staff) is at 103.5, up on April’s result of 102. Anything less than 100 indicates a contraction.

Constraints reported were 82% markets and 18% production capacity.

Staff numbers for May increased year on year by 3.1%.

“An upturn in domestic sales, staff numbers and confidence is positive,” says NZMEA Chief Executive John Walley. “Improving staff numbers are encouraging as they had contracted every month since September last year.”

“However, the decline in export sales is a concern and does not look like turning around with the exchange rate shooting back up over the past month or so.”

“The performance and forecast indexes have also edged up slightly again this month, indicating a more positive outlook.”

“Several respondents identified Christchurch rebuild work as opportunities for their businesses and problems in overseas markets as well as the high New Zealand Dollar were noted as ongoing threats.”

“The threats to export businesses need to be heeded. We have seen companies such as Norman Ellison Carpets downsizing and there are a number of firms who are having difficulties making ends meet.”

“It must be remembered that exporters haven’t seen any sustained respite from a high New Zealand Dollar since 2004. Not surprisingly, that was the last time we saw growth in the traded sector.”

“With a new Reserve Bank Governor starting in September this is an ideal time to review the policy settings that lead to an overvalued currency. Changes to the Reserve Bank Act are needed – additional prudential tools to complement the Official Cash Rate, and a wider set of targets to include export growth and employment.”