New Zealand’s manufacturing and wholesale SMEs are optimistic for the year ahead, and remain positive that rising consumer confidence will translate into strong sales, according to the latest MYOB Business Monitor survey.

The survey of more than 1,000 business operators nationwide highlights that nearly half (44 per cent) of all manufacturing and wholesale SMEs are expecting a revenue increase in the year to March 2017. This is well above the national average of 37 per cent.

The survey underscores that the industry is expecting a considerable improvement in performance from the year to March 2016, when 32 per cent of the industry reported revenue gains, while 26 per cent saw revenue fall – above the national average of 21 per cent.

MYOB New Zealand General Manager James Scollay says the sector’s optimism for the year ahead was great news for the whole economy.

“Manufacturing and wholesale is a vital sector for the country. These businesses are at the heart of most of our communities and provide not only access to goods and services, but they create many job opportunities,” Mr Scollay says.

“To see this level of expected growth over the next 12 months is great news, particularly after a somewhat challenging year.”

The release of the survey comes at the same time that Statistics New Zealand released its March quarter Economic Survey of Manufacturing. It showed that while meat and dairy manufacturing was down 7.8 per cent reflecting difficulties in that sector, sales rose for eight of the 12 other manufacturing industries.

Sales trending up

Work in the sector is already beginning to shoot ahead, with 48 per cent of SMEs reporting they had more work on in this quarter than was usual for this time of year. This is up from 35 per cent last quarter and higher than the national average of 31 per cent.

Key pressures for the sector

An intensely competitive market is proving stressful for many SMEs in the sector, with more than a third (41 per cent) highlighting it as their biggest concern. Price margins and profitability, as well as cash flow, are also resulting in additional pressure.

Key pressures for manufacturing and wholesale operators:
1. Competitive activity – 41 per cent
2. Price margins and profitability – 39 per cent
3. Cash flow – 39 per cent
4. Exchange rates – 36 per cent
5. Upgrading software and retaining existing customers – 33 per cent

The exchange rate is also having an impact on the industry, with the fluctuation of the New Zealand dollar making it increasingly difficult for SMEs in the sector to predict future business costs. When asked to what extent the dollar affected the cost of running their business, nearly half (46 per cent) said it had a negative impact, while 24 per cent said that it also affected consumer confidence.

Technologically savvy

The manufacturing and wholesale sector has the largest online presence of all the sectors surveyed in the Business Monitor, with 85 per cent of businesses using a website or social media site, up from 70 per cent in September.

Thirty-seven per cent operate only a website, while just nine per cent have a social media site; 39 per cent have both.

Mr Scollay says this increased presence will only do more to benefit the sector, with the potential to boost sales while also increasing customer interaction and visibility.

“The increase in the number of SMEs online, not only in the manufacturing and wholesale sector, but across the board, shows they are investing and innovating to stay ahead of the competition and bodes well for the wider economy moving forward.”

Strategies for the year ahead

Not only are manufacturing and wholesale SMEs optimistic for the future, they’re also planning significant investment in their businesses in the next 12 months.

Over half (54 per cent) of manufacturing and wholesale SMEs said they planned to increase the products and services they offered while 45 per cent are looking to boost their customer retention strategies.

More job opportunities will be available within the sector, with 26 per cent of SME operators intending to increase the number of full-time employees in the year to March 2017. Nineteen per cent expect to increase the number of part-time or casual employees in their business.

“This is good news for the many New Zealanders employed by the manufacturing and wholesale sector, and those looking for work within the industry,” Mr Scollay says.

“And overall, our latest MYOB Business Monitor figures shows the sector in good shape, with SMEs remaining consistently confident about their own prospects and the wider economy.