The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during February 2014, shows total sales in January 2014 increased 10.0% (year on year export sales increased by 32.56% with domestic sales decreasing 5.17%) on January 2013.

The NZMEA survey sample this month covered NZ$342m in annualised sales, with an export content of 49%.

Net confidence was at 21, down on December’s result of 30.

The current performance index (a combination of profitability and cash flow) is at 98.7, down from 101.7 in December, the change index (capacity utilisation, staff levels, orders and inventories) was at 102, down from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 107.17, up on Decembers result of 103.67.  Anything less than 100 indicates a contraction.

Constraintsreported were 57% markets, 36% production capacity and 7% skilled staff.

Productivity for January was unchanged on last month.

Staff numbers January increased year on year by 0.93%.

All staff segments, tradespersons, operators/labourers, supervisors, managers and professional/scientists, reported a moderate shortage for January.

“This month continues the trend we have been seeing through recent months, with exports gaining ground and domestic sales falling.  Some of this export improvement can be attributed to some particularly large respondents reporting significant year on year increases.  Things are starting to look better on the surface, but many are still cautious,” says NZMEA Chief Executive John Walley.

“Indexes are again fairly mixed, with net confidence and performance down, while the forecast index improved.”

“Concern remains around our overvalued currency and the absence of any policy response, reducing margins and putting import competing manufacturers under price pressure.  The signalled OCR increases by the Reserve Bank of New Zealand (RBNZ) over the coming months have the potential to make this worse.”

“There are other macro-prudential tools which can be adopted alongside the OCR to tackle inflation in the domestic sector without deflating the tradable sector further by appreciating our currency.  For example, the LVR addition to the other macro-prudential tools now available to the RBNZ have shown some excellent traction, adding income to debt restrictions would provide a further and focused intervention tool to control debt that would not have the exchange rate kicker.  Holding off on interest rates until the world gets back to normal would support the traded sector.”

”It is worth remembering that even with Terms of Trade at a 40 year high, rising 2.7% on the last quarter, largely driven by high export prices for our main commodities, we still struggle to balance our external position.  Our trade balance has improved, from a negative trend throughout 2012 and the first half of 2013; to a trade surplus of $320m in January this year but our net external debt remains high at $144,426m, and our current account deficit is predicted to increase in the future.”