Business News

Despite a dip in expansion levels, the service sector remains on the right side of growth, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for June was 54.3. This was down 2.3 points from May, although still within a relatively tight band of expansion for the last five months (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous June results, the 2012 value was on par with both 2010 and 2011. BusinessNZ chief executive Phil O’Reilly said that the New Zealand service sector remained in a healthy position, although global stagnation continues to cause concern. “Although comments from respondents continue to be more positive than negative, there are certainly many swings and roundabouts when individually examined. Issues such as ‘seasonal factors’ and ‘orders from offshore’ fall at either end of the spectrum. “With global service sector growth at its weakest point in nearly three years, it remains to be seen what type of influence this will have on New Zealand’s position over the second half of 2012.” BNZ Senior Economist Craig Ebert said, “While June’s PSI details remained frustratingly volatile, its overall level remained clearly encouraging with regards to economic growth.” The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for June showed the two options for measuring the PCI both down from May, as the lower manufacturing and service sector results eased combined activity. The GDP-Weighted Index (53.6) decreased 2.9 points from May as the dip in service sector expansion was not as strong as the fall for manufacturing. The Free-Weighted Index (52.6) decreased 3.5 points to return to a similar level of expansion seen in April. Despite the small dip in […]

The new Advanced Technology Institute is a great initiative and much needed but will get off to a slow start unless business is deeply involved in it from the outset, the Employers and Manufacturers Association says. “Science, R&D and innovation are the building blocks for our economic future and the ATI could become the leading place for their development,” said Kim Campbell, EMA’s chief executive. “But without the full buy in and deep involvement of business at the outset it is destined to start off slowly. “Science on its own won’t realise its potential for delivering wider economic benefits unless business can integrate tightly with it and want to invest more in it. “Without much more science and R&D, the success of all our businesses will be far less than we need it to be to maintain our standards of living. “Science and business need to work together on research projects of potential value to both our knowledge base, and commercial success. “Access to the ATI must not be limited to our high tech high flying companies but act as a magnet for wide business involvement in science and R&D. “Merely setting up an institution such as the new ATI and instructing it to grow new technology based firms won’t of itself do this efficiently. “So while the announcement of the ATI is very welcome its really a statement of commitment that must be matched with actions demonstrating how science and business will communicate and integrate at a fundamental level.”  

New Zealand’s largest business network and the largest Maori business network will join together today to bring better value to their members, as well as the Maori and New Zealand economies. BusinessNZ and the Federation of Maori Authorities will sign an agreement today in Wellington to work together for the benefit of more than 140 Maori businesses with a combined asset base worth around $8billion that are affiliated to the Federation, and the thousands of businesses associated with BusinessNZ. The Memorandum of Understanding will see both parties work more formally and closely together in the best interests of their collective members. “BusinessNZ and the Federation have worked co-operatively and collegially with successful results in the recent past. So we have already identified areas where our organisations might work together more closely to extend our respective influence and to add further value to our members,” said Federation chief executive Te Horipo Karaitiana. BusinessNZ chief executive Phil O’Reilly agrees, “New Zealand’s success depends on business success. We need to cast the widest possible net and ensure both Maori and non-Maori businesses are involved in the quest for New Zealand’s success. This joint work is an exciting new chapter for both organisations.” The signing will take place tonight at 5pm at the Michael Fowler Centre in Wellington.      

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 […]

Company founder John Down speaking to clients and staff at the opening of ENI Engineering’s new Christchurch premises. Christchurch firm ENI Engineering has relaunched one which Founder John Down says was a strategic move the company has been working towards for some time. “We are definitely geared up for the new opportunities being presented by the rebuild of Christchurch and Canterbury,” Down says. “As yet we don’t know what all of those opportunities will be, but we are well equipped and positioned to provide a high level of service and rapid turnaround to meet whatever demand comes our way.” Growth over the last five years has been an impressive 60% in terms of turnover, achieved by using lean manufacturing methods and increasing capability, while staff numbers remained steady. ENI’s traditional business of sheet metal fabrication and finishing of a range of metal products including low emission log burners was recently boosted by a new contract with Eaton and Telecom’s Chorus will see ENI manufacturing roadside boxes for the Ultra Fast Broadband rollout throughout New Zealand. The company currently has 52 staff, making it one of the largest sheet metal fabrication companies in Christchurch, with further growth on the horizon expected to support the ongoing city rebuild process. The company also has a longstanding contract to supply all roadside steelwork for the Orion network, as well as transformer housings, boundary boxes and internal switch gear for substations on new subdivisions.  

  The EU summit at the end of last week produced some positive developments in an attempt to break “break the vicious circle between banks and sovereigns”, against a background of low expectations. Key parts of the summit proposals are: • The European Commission will shortly present a proposal to establish a single banking supervisory mechanism. These proposals will be considered “by the end of 2012”. • When an effective single supervisory mechanism is established, the European Stability Mechanism “could have the possibility” to recapitalise banks directly. Given that the supervisory mechanism will not likely be in place until year-end, direct bank recapitalisation appears unlikely to occur before early 2013. But once in place, direct bank recapitalisation will remove the need to provide funds via the respective government, and in turn increase the government’s stock of debt. • The funds provided to Spain for its bank recapitalisation will not have “seniority status” relative to other lending to Spain. One of the factors behind the recent sell‐off in Spanish bonds has been concerns about possible debt subordination. • The European Financial Stability Fund/ESM will be used in a “flexible and efficient manner in order to stabilise markets”. This implies that the EFSF/ESM funds will potentially be used to cap Spanish and Italian bond yields in the near term. Market reaction has been very positive, both on Friday during NZ trading time and Friday night’s European and US sessions. There is, however, the likelihood that the positive sentiment fades over time. Although Europe made some important steps to try de-linking banks and governments, deep-seated problems remain. And Europe as a whole has slowing more sharply in recent months, with worrying signs that core economies like Germany are being pulled down by the contractions in the troubled countries. The summit proposals still have […]

Brent Wilton, a former senior manager at the Employers and Manufacturers Association (Northern) in Auckland, has been appointed Secretary General of the International Organisation of Employers (IOE) based in Geneva, Switzerland. The IOE is the international body that represents employers and the worldwide business community in international forums. Brent Wilton joined the IOE in 1999 where most recently he has specialised in business engagement in corporate social responsibility, and wider human rights issues. EMA chief executive Kim Campbell congratulated Mr Wilton saying the appointment extended New Zealand’s reputation for boxing well above our weight in international affairs, in trade negotiations, at the UN and now at the IOE. Mr Wilton was formerly the Manager of Consultancy and Legal at EMA in Auckland until 1999 involved in national, regional and enterprise-based bargaining. He also represented New Zealand employers in a range of legal matters, both in mediation and in the Labour Court. He has lectured for a number of New Zealand universities on industrial relations and human resource development and continues to be involved in the direct delivery of training.  

The Policy Targets Agreement (PTA) with the newly appointed Reserve Bank Governor Graeme Wheeler must have some serious revision say the New Zealand Manufacturers and Exporters Association (NZMEA). Wheeler was named as the Governor to replace Alan Bollard on Tuesday and will sign a new PTA with the Minister of Finance before taking over from Alan Bollard. NZMEA Chief Executive John Walley says, “The appointment of a candidate from outside of the Reserve Bank is a good sign as there seems to be a culture of support for the status quo at the Bank, despite overwhelming evidence that it is not in New Zealand’s best interests.” “Mr Wheeler and Bill English should be guided by the International Monetary Fund (IMF) which has described strict inflation targeting as ‘not optimal’ and said that ‘the consequences of adverse exchange rate movements have to be taken into account’ for small trade focused economies.” “Our Government and its officials still claim that we are following ‘best practice’ with our inflation targeting monetary policy but since the financial crisis best practice has changed. A more pragmatic approach where other prices in the economy such as the exchange rate are considered are now favoured and alternatives to an inflation target have been suggested.” A number of institutions have changed their opinion since the economic crisis: • IMF, Rethinking Macroeconomic Policy. • Swiss National Bank, Swiss National Bank sets minimum exchange rate. • Jeffrey Frankel, a professor at Harvard University’s Kennedy School of Government: The Death of Inflation Targeting. “The IMF has recently estimated that a 15 percent drop in the exchange rate would be needed to balance our current account,” says Mr Walley. “This should be a target for the Government and the Reserve Bank.” “In the longer term a there needs to be a more […]

Christchurch businesses are struggling with a cash flow crisis that threatens to cripple the region’s efforts to rebuild according to Lock Finance, which has specialised in business financing since 1889 and has a significant number of Canterbury clients. Lock Finance CEO Simon Thompson, who is also a part time consultant to the World Bank, explains: `Almost a third of our clients are based in the Canterbury region and a significant challenge for many of them is balancing the payments that need to go out with the timing of the work coming in. “The time taken by the EQC to approve work, together with the policies adopted by some major contractors mean that there is sometimes a gap of six months or more between money going out on wages, materials and running costs, and the money coming in for work completed.’ Business Mentors New Zealand Canterbury Coordinator Jill Taiaroa agrees that the mentoring service is seeing cash flow related distress among SMEs in the region: `There is a delay running through the whole system that is causing the problems. There are so many people in the chain, from the EQC, the larger players and then a lot of sub contractors, that there are inevitable long delays which impact on smaller companies’ cash flow making it very difficult for them to retain staff until the work is approved.’ Simon Thompson visits the region at least once a month and reports that on his last trip he met one client with a drainage contracting business who had a lot of work being processed by EQC but was unable to use those prospects as business finance equity and consequently was losing his best workers to projects in Queensland. Another client has 4,000 driveways and 300 swimming pools to repair; work which will keep his […]