Business News

August saw a mix of results that kept manufacturing in expansionary mode, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for August was 52.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was down slightly on the July result of 53.2, almost all results since November 2010 have been above 50.0 and within a relatively narrow band between 52.7 and 54.7. BusinessNZ’s Executive Director for manufacturing, Catherine Beard, said that the negatives for August were equally matched by positives elsewhere. “Over the last four months we’ve experienced the steadiest period of activity since the survey began in 2002,” she said. “Looking at the current month, while elements of the manufacturing sector, such as those by region and sub-industry fared worse in August, this was counteracted by pick-ups elsewhere, notably the Otago-Southland region and the metal product manufacturing sector.” BNZ economist Doug Steel said that it is important to look at all information in assessing economic performance. As ever, it pays not to read too much into any one number. While this is true at the best of times, it is especially important now with so many moving parts. “August’s PMI continues a remarkably steady run over recent months, but masks considerable and widening variation in the detail. While this variation reflects the many factors pushing and pulling the economy, it is encouraging to see the overall trend remain positive,” Doug Steel said. Despite the dip in expansion, four of the five seasonally adjusted main diffusion indices were still in expansion during August. Deliveries (55.8) led the way with a result similar to June 2011, followed by new orders (54.3). Encouragingly, production (53.7) increased 1.2 points from July 2011, while finished stocks […]

The Reserve Bank of New Zealand (RBNZ) should take the Swiss National Bank’s lead at the Official Cash Rate announcement on Thursday and take action on the exchange rate say the New Zealand Manufacturers and Exporters Association (NZMEA). Switzerland, like New Zealand, is a small trade exposed economy that relies heavily on export revenues and they have recently moved to peg their currency to support and maintain the competitiveness of their exporters. Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank made the announcement: “The Swiss National Bank is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below one Swiss franc twenty. The SNB will enforce this minimum rate with the utmost determination.” NZMEA Chief Executive John Walley says, “This is the sort of approach New Zealand needs to take. It does not require a currency peg as the Swiss are using, any number of approaches can be adopted, but whatever the method chosen the same overt commitment to deal with an overvalued currency needs to be demonstrated to get the right reaction from currency markets.” “As a comparison the RBNZ’s largely hands off approach encourages the currency markets to play that predictability without fears of any sustained intervention.” “New Zealand must look to advance its own interests as the rest of the developed world are doing – this requires action from the Government and the RBNZ. More of the same don’t scare the horses approach will see an ever declining tradable sector and worsening debt problems as a result.”  

The agreement struck for government to provide funding for workers required to ‘sleepover’ as part of their workplace arrangements has been cautiously welcomed by the Employers & Manufacturers Association. “Its good the sleepovers issue is to be resolved, but some employers will be nervously waiting to see how far the government’s generosity will extend,” said David Lowe, Employment Services Manager for the EMA. “Employers are pleased the government is prepared to stump up with the funding necessary to settle the case,” he said. “However the precedent affects more employers than just those in the disability and health care sectors, and it remains to be seen if the legislation applies to all employers, or just those who are government funded, or those who are government funded through the health vote. “Some employers in education and other sectors will be nervously watching how far the breadth of the proposed legislation will extend before giving it an unqualified tick.”  

A static performance is not enough when our competitors are accelerating, says BusinessNZ. Commenting on the World Economic Forum’s Global Competitiveness Report, BusinessNZ Chief Executive Phil O’Reilly (left) said this was the clear message from this year’s report. Two years ago New Zealand ranked as the 20th most competitive nation in the world; last year that slipped to 23rd; and this year it is 25th – because New Zealand’s score has remained stable while other countries have improved.   Mr O’Reilly said the report was helpful in highlighting areas for improvement. “Some of the problem areas result from New Zealand’s geographic location and small population size, including domestic market size (60th), state of cluster development (60th), value chain breadth (59th), local supplier quantity (58th) and intensity of local competition (45th). “But other problem areas are more within our power to fix. We should focus on doing better in the areas of balancing the budget (112th), taxation as a percentage of profits (51st), quality of infrastructure (50th) and government debt (47th). These reflect a need for more restrained, better quality government spending.” “Gaining better scores around innovation and technological readiness should also be a priority. “New Zealand has retained high rankings for many of the foundational elements of competitiveness – health, education, low corruption, low trade barriers, low inflation and ease of starting a business. We need to build on these to gain higher rankings in the more sophisticated areas of business and trade.” The Global Competitiveness Report ranks countries according to their ability to compete internationally, using factors such as markets, institutions, infrastructure and human resources.  

New Zealand’s Global Competitiveness Index score has remained stable since last year but the country has slipped two places to 25th of 142 countries, overtaken by Israel and Malaysia. New Zealand’s overall performance is limited by innovation and business sophistication, the most important drivers of economic performance in advanced economies. The New Zealand Institute Director Dr Rick Boven says, “Government has increased efforts and investment in innovation but we cannot yet see evidence of improvement. Other countries are doing more. New Zealand needs to lift performance more or our competitive position will continue to slide”. The Global Competitiveness Report is produced annually by the World Economic Forum.Switzerland ranked 1st for the third year in a row, followed by Singapore which overtook Sweden to claim second position. The United States declined for a third year to 5th place as macroeconomic vulnerabilities continue to build and some aspects of the institutional environment have raised concern among business leaders.  Canada (12th) slipped out of the top ten, replaced by the United Kingdom.  Australia ranked 20th a drop of four places since last year. China improved by one place to 26th, continuing to lead the way for large developing economies. Among the four other BRICS economies, South Africa (50th) and Brazil (53rd) move upwards while India (56th) and Russia (66th) experienced small declines. The World Economic Forum Founder and Executive Chairman, Klaus Schwab says that while most advanced economies are experiencing a sluggish recovery from the economic crisis, much of the developing world is seeing relatively strong growth. The Global Competitiveness Index is made up of 111 indicators categorised into twelve pillars of competitiveness in three sub-indices:Basic requirements,Efficiency enhancers, andÊInnovation and sophistication factors. New Zealand continues to do well in Basic requirement and Efficiency enhancers, ranking 17th (14th last year) and 18th (same as […]

BusinessNZ is pleased to see the Labour Party’s youth skills and employment policy focusing on the crucial need to ensure that all young people under 20 years of age are learning or earning. BusinessNZ, Chief Executive, Phil O’Reilly said training more apprentices is something many businesses will welcome. “Both parties need to ensure that available training opportunities form a coherent vocational education system with clear pathways to work. “We must also focus on driving performance with strong accountability mechanisms so more of our young people are better prepared for employment. “We have to do a better job of connecting learning at all levels with the benefits it delivers young people in the labour market. “We know that the employment prospects for young people with no or low skills and/or experience are very sensitive to wage levels, so we need to ensure that taking on apprentices and employing young people is an attractive proposition for employers. “Labour’s policies recognise the importance of training, but it’s also important that the vocational system recognises employers’ needs as well.” BusinessNZ welcomes what appears to be a cross party consensus around initiatives like Gateway, Trade Academies, vocational pathways in schools, strengthened careers education, and support for the Recognised Seasonal Employers scheme.    

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2011, shows total sales in July 2011 increased 13.5% (export sales increased by 16.4% with domestic sales increasing 11.2%) on July 2010. The NZMEA survey sample this month covered NZ$439m in annualised sales, with an export content of 46%. Net confidence rose to -22, up from the -38 result reported last month. The current performance index (a combination of profitability and cash flow) is at 96, up from 93 in June, the change index (capacity utilisation, staff levels, orders and inventories) went down to 99 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 103, up on June’s result of 99.75. Anything less than 100 indicates a contraction. Constraints reported were 78% markets, 11% staff and 11% production capacity. Staff numbers for July increased year on year by 2.8%. “Export sales have recovered this month although continuing currency pressures will reduce returns,” says NZMEA Chief Executive John Walley. “Favourable conditions remain for those exporting to Australia and Asia driving the sales expansion.” “The indexes and confidence measures are still a concern with the performance index in particular showing the loss of profitability and the confidence rating remaining in negative territory where it has been for six of the seven months surveyed so far this year. The number of pessimists has strong grown strongly as the no change group has contracted.” “Overall the demand for New Zealand’s exports is holding up for the moment, but with the global outlook very uncertain this could change quickly.” “Comments from the survey covered reduced margins due to the high New Zealand Dollar and concerns over whether demand from overseas markets will hold up. Christchurch respondents also noted that ongoing impacts […]

The SME sector can play an even more important part in the recovery and growth of the New Zealand economy.   Picture: Paul Kane With an election looming, every small businesses in New Zealand needs to lift their voices and be heard, asking each electoral party what they will be doing to help the SME sector. Paul Kane, a partner in New Zealand accounting firm Grant Thornton, said that for a sector that plays such an important part in the New Zealand economy, it is plaqued by a defeaning quietness. “Businesses employing five or fewer staff make up about 84% of New Zealand enterprises and businesses employing fewer than 50 staff make up nearly 99% of enterprises. “Yet, when it comes to the Budget or elections, what do you hear from small business? Normally, very, very little. Minority groups of all shapes and size are out beating their drums, but small business seems to be paralysed by stereophonic silence. “Most small business owners obviously do not know what other countries do for their small to medium enterprises otherwise they would be up in arms,” he said. The United States, Canada, the United Kingdom, India and Germany, to name but a few, all offer assistance to the SME sector. “One of the best examples and one that could be easily copied in New Zealand, is the United KingdomÕs Enterprise Finance Guarantee (EFG), which is a targeted measure intended to facilitate additional commercial lending to viable SMEs unable to obtain a normal commercial loan due to having insufficient or no security. “EFG facilitates lending that would not otherwise be available by providing lenders with a partial guarantee,” he said. Kane said that undercapitalisation is perhaps the biggest single reason for SMEs to fail in New Zealand. “The number of new businesses that […]

41 percent of respondents rate the overall performance of their insurance company’s response to claims as ‘very poor’ or ‘poor’ while only 18 percent rated their performance positively according to a New Zealand Manufacturers and Exporters Association (NZMEA) survey. The survey assessed damage after the June earthquakes and the performance of insurance companies and Government organisations. It showed that significant further damage has occurred setting back rebuilding plans. Overall there was significant dissatisfaction with the performance of insurance companies but the response to the efforts of the City Council, Civil Defence and the Central Government rated much better. NZMEA Chief Executive John Walley says, “We have had complaints from a number of sources that insurance companies have been slow to pay out and this is obviously frustrating for firms wanting to get on with business rather than chasing insurance companies. At the extreme end a couple of firms have had to employ third parties to manage their claims.” “Comments expressed concerns about insurance companies delaying claims, not responding to emails and only dealing with issues after being chased. Insurance companies have the experience and should be guiding claimants through the process rather than putting up roadblocks – it seems incredible that insurance companies would not have procedures in place to manage the claims process, after all these events are their business. QBE was rated poorly by all respondents insured and while it must be noted that some respondents did report a good experience with their insurers there were no companies that scored consistently well.” “There have also been some concerns with new policies with excess required for a claim going up from $2,500 to between $100,000 and $200,000 in some cases. While it is understandable that costs will increase this leaves firms completely uncovered for a small event.” “Government organisations […]