The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions, completed during June 2017, shows total sales in May 2017 decreased 2.34% (year on year export sales decreased by 5.68% with domestic sales increasing by 10.99%) on May 2016.
In the 3 months to May, export sales decreased an average of 14.4%, and domestic sales increased 7.1% on average.
The NZMEA survey sample this month covered NZ$251m in annualised sales, with an export content of 77%.
Net confidence fell to 25, down from 40 in April.
The current performance index (a combination of profitability and cash flow) is at 98.7, up from 97.7 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 100, up from 98 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104.2, down on the last result of 105.7. Anything over 100 indicates expansion.
Constraints reported were 60% markets and 40% skilled staff.
A net 10% reported productivity improvements in May.
Staff numbers decreased 2.28% year on year in May.
Supervisors, tradespersons and managers, reported a moderate shortage, while professional/scientists and operators/labourers showed a minor shortage.
“This month’s domestic sales improved on April’s results, showing growth of 10.8% on May 2017. Despite the negative result seen last month, domestic sales have experienced a largely positive growth trend in the last year. In the three months to May, there was an average monthly growth of 7.1% on the same months last year.” Said NZMEA Chief Executive Dieter Adam.
“Export sales, on the other hand, experienced another month of decline, -5.7% on May 2016, reinforcing the general negative trend felt over the last year. In the three months to May, average monthly sales decreased 14.4% on the same months last year.
“Export sales results were also reflected in the recent Overseas Merchandise Trade numbers from stats New Zealand. For example in May, both mechanical machinery and equipment and electrical machinery and equipment experienced decreases in export sales values on May 2016.
“Finding skilled staff has become a larger issue for manufacturers in May, with the skilled staff constraint having the highest value since February 2008, at 44%. It was commented by respondents that tradespeople are of particular need – a sentiment that was shared by a number of companies at a recent NZMEA event with the Prime Minister.
“Industry and Government need to work together to improve our education system and industry training to start to address these skill shortages that hold Kiwi manufacturers back. This can be done – there are a number of examples around the world of such skill shortages being address effectively, such as Germany.” Said Dieter.
For analysis tables and graphs, click here.
| An NZMEA release || July 13, 2017 |||
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The latest growth figures from Statistics New Zealand and the latest OECD report review of our economy, published yesterday, show that while our economy keeps growing, we’re lacking in areas that can really make us a wealthier nation, say the New Zealand Manufacturers and Exporters Association.
NZMEA Chief Executive Dieter Adam said, “Our GDP is rising, but on a per capita measure, it is much less impressive – we need to harness our potential and work on growing our high-value productive industries to improve this. Real GDP per capita growth in New Zealand is currently below the OECD average, and remains well below what we achieved for the 20 years up to 2007, as the latest OECD figures show.
“Productivity improvement is the key to improving our economic growth, incomes and wealth over time, however, it continues to lag in New Zealand. For example, the OECD report highlights labour productivity in terms of GDP per hour worked falling consistently behind Australia and the United States over the last 20 years.
“The thing is – as Sir Paul Callaghan told us many times before his untimely death in 2012 – we’re not going to grow the value of what we create every hour from having more tourists and more cows in the country; hence the title of his last book “Get off the Grass”.
“To really grow our economy, we need to produce and export more high-value goods and services, and we need to do so more efficiently, increasing productivity. Manufacturing and ICT, two sectors growing more and more intertwined as digital technologies penetrate our manufacturing businesses, already are key contributors to our economy, and they primarily are the ones to turn to when we look for more high-value products and services.
“The key to growth in manufacturing and ICT is innovation, and in the case of manufacturing, process innovation. There is a raft of new digital technologies coming to manufacturing, often referred to as Industry 4.0 or the Industrial Internet of Things. New Zealand needs to embrace these technologies, while at the same time investing in new and smarter products, services and business models.
“The OECD report provides us with some pointers for how to achieve more innovation and productivity. For example, we need to increase non-residential investment, an area we are low at by international comparison, and we need to invest more in innovation activities - again an area we fare poorly compared to the rest of the OECD.
“The report recommends “More fiscal support for business research and development” – we believe that is best achieved through a general R&D tax credit replacing the cumbersome current grant scheme. But the report also points out that our corporate tax rate still is higher than most of our competitors – again a disincentive for more private investment in R&D.
“It will be interesting to see whether the Government takes any note of the sobering figures and sensible recommendations contained in this OECD report. Let us hope we’re not going to squander another opportunity to really put our economy on a stronger footing.” Said Dieter.
| An NZMEA release || June 16, 2017 |||
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Forecasting is a valuable part of the monetary policy process, helping the Bank plan for the future, communicate its current understanding and intentions, and react to unexpected events, Reserve Bank Assistant Governor and Head of Economics Dr John McDermott said today.
During a speech to the New Zealand Manufacturers and Exporters Association (NZMEA) in Christchurch, Dr McDermott outlined the reasons why the Bank regularly produces and publishes forecasts and Official Cash Rate (OCR) projections.
“Forecasting is not supposed to be prophecy; rather, it is about being precise about our thinking. It requires the Bank to be rigorous, unbiased, and open to new ideas in formulating and implementing monetary policy. Being numerically precise about our view of the future allows us to test ideas, which in turn accelerates our ability to learn and understand what is going on,” said Dr McDermott.
Dr McDermott said the economy is populated with thousands of households and businesses responding to their own particular circumstances and opportunities, and therefore the range of possible outcomes is vast. Because of the complexity of the economy and the developments continually affecting it, the Bank’s forecasts are inevitably subject to change.
“The Bank’s forecasts are highly conditional on the information currently available and are revised when important additional information comes to light. In recent Monetary Policy Statements the Bank has published scenarios to illustrate how the forecasts would change should the economy develop differently,” said Dr McDermott.
Forecasts also help people form expectations of the future and therefore guide current actions. By building people’s understanding of how the Bank is likely to react to news, and by explaining its forecasts and policy stance, the predictability of monetary policy decisions is enhanced and policy uncertainty is reduced.
More information: The value of forecasting in an uncertain world
| A RBNZ release || May 15, 2017 |||
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions, completed during April 2017, shows total sales in March 2017 increased 2.93% (year on year export sales decreased by 8.10% with domestic sales increasing by 17.95%) on March 2016.
In the 3 months to March, export sales decreased an average of 9.4%, and domestic sales increased 7.1% on average.
The NZMEA survey sample this month covered NZ$360m in annualised sales, with an export content of 51%.
Net confidence rose to 23, up from 0 in February.
The current performance index (a combination of profitability and cash flow) is at 97, down from 98.3 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 102, up from 100 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 105.33, down on the last result of 106.33. Anything over 100 indicates expansion.
Constraints reported were 78% markets, 11% skilled staff and 11% capital.
A net 38% of respondents reported a productivity increase in March.
Staff numbers increased 4.31% year on year in March.
Supervisors, tradespersons, managers, professional/scientists and operators/labourers reported a moderate shortage.
“Domestic sales lead growth for manufactures in March, increasing an impressive 17.95% on March 2016. Average monthly growth for domestic sales over the last three months was 7.1%. Staff numbers have also picked up, increasing 4.31% on the same month last year, a break from a recent trend of staff number decreases.” Said NZMEA Chief Executive Dieter Adam.
“In contrast, export sales have continued to struggle, falling 8.10% on March 2016, resulting in an average decrease of 9.4% in the past three months. Exports experienced a monthly average decrease of 4.8% in the last 12 months, compared to the same months in the previous year.
“Net confidence rose from the neutral position of 0 in February, to a more positive 23, while two out of three index measure (performance and forecast) experienced a slight decrease on last month. Market conditions remained the highest reported barrier to growth, significantly higher at 78% than skilled staff and capital, both at 11%.
“The challenges in export sales in this survey was reflected in the recent Overseas Merchandise Trade release by Statistics New Zealand. Mechanical machinery and equipment export values felt a fall of 6.13% in March on the same month last year, while electrical machinery and equipment experienced a 1.61% decrease in the same period.
“Exports are an indispensable part of the path to a more prosperous New Zealand. However, the backward movement in exports over the last year presents a real challenge that needs addressing. As the election approaches, we need to see all political parties put ideas forward on how to create an environment where our high value exports can grow and thrive.” Said Dieter Adam.
The New Zealand Manufacturers and Exporters Association survey gathers results from members around New Zealand. It provides a monthly snapshot of manufacturers and exporters’ sales and sentiment.
For results tables and graphs, click here.
| An NZMEA release || May 15, 2017 |||
Debt to Income caps (DTI) have been highlighted in a recent IMF report as an important measure to build resilience in our banks and housing market to protect financial stability. The Government needs to be willing to give the RBNZ the power to implement these DTI caps, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “Financial stability remains an issue for our economy, particularly with a rapidly increasing housing market, despite some recent moderation, and high private debt levels. All parts of the economy are damaged in any financial downturn, especially the tradable sector, such as our manufacturers.
“Loan to Value ratios were a positive step forward in this area by the RBNZ, and adding DTI caps, which have been used in other countries, could help further ensure the quality of debt in the housing sector and increase bank's strength against future financial pressures.
“The IMF’s report on New Zealand stated, “Adding a debt-to-income cap to the macroprudential toolkit would enhance systemic resilience by limiting the risks from growing household indebtedness.”
“It was disappointing that the Minister of Finance removed DTI’s from the Memorandum of Understanding (MOU) earlier in the year. The RBNZ should move forward with their research and consultation of DTI’s and the Minister of Finance needs to add these back into the MOU to allow the RBNZ to implement them.” Said Dieter.
| A NZMEA release || May 11, 2017 |||
Today, the Productivity Commission published its final report on the Tertiary Sector. At the same time, the OECD Environmental Performance Review of New Zealand strongly highlighted the need for a fundamental change in our approach to building wealth sustainably in this country. The need to create an effective education system that can provide much needed skills to facilitate growth and innovation in high-value activities, such as manufacturing, connect these reports, say the New Zealand Manufacturers and Exporters Association (NZMEA).
“The OECD report clearly shows that with New Zealand having the second-highest level of greenhouse gas emissions per GDP unit in the OECD, a continued emphasis on increasing primary production and tourism will not allow us to meet our international climate change obligations. We need to create wealth by growing our high-value industries. The biggest handbrake on growth there, however, are skills shortages that are crippling in some instances now and will only get worse with the rapid technology changes occurring in high-value manufacturing, for example.” said NZMEA Chief Executive Dieter Adam.
“One could have expected an 18-month review of our tertiary education system by the Productivity Commission to at least recognise, let alone address, the fact that we have a largely publicly funded tertiary education system that fails to deliver what New Zealand needs to grow its wealth as a nation. Unfortunately that is not the case – the Productivity Commission has widely missed the mark here in providing a response to skill shortages.
“Instead, we get a strong focus on the academic side of the tertiary sector and the suggestion that more free-market initiatives will enable to tertiary sector to meet its future challenges. As if we didn’t have enough problems currently maintaining quality in a sector where some barriers to entry are low and oversight can be patchy at best. The Commission’s report also aims to make the system even more student-focused, instead of offering suggestions for how to develop a well-functioning and efficient education system that balances the need to meet student desires with the overall needs of our economy to grow on a sustainable basis.
“A balanced system could be achieved, for example, in part by incentivising studies in areas that we know have current and future skill shortages. For example, the incentives offered by government to those taking up apprenticeships in priority trades and construction in 2013. At the same time, businesses also need to be supported to do their part in training and up-skilling their own workforce.
“The Productivity Commission’s report does have some positive suggestions, particularly the need to review and improve careers advice in schools, and expanding the idea of lifelong learning, helping people continue to gain new skills and adapt to changes over time. All in all, however, it substantially misses the opportunity to address one of the more important issues we are facing as a nation – how to equip future generations with the ability to find rewarding careers in an economy subject to strong winds of change.” said Dieter.
| An NZMEA release \ March 21, 2017 |||
The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions, completed during February 2017, shows total sales in January 2017 decreased 2.49% (year on year export sales decreased by 3.86% with domestic sales decreasing by 0.66%) on January 2016.
For results tables and graphs, click here.
In the 3 months to January, export sales increased an average of 4.2%, and domestic sales increased 4.8% on average.
The NZMEA survey sample this month covered NZ$232m in annualised sales, with an export content of 56%.
Net confidence fell to -7, down from 10 in December.
The current performance index (a combination of profitability and cash flow) is at 101.3, up from 99.3 last month, the change index (capacity utilisation, staff levels, orders and inventories) was at 101, with no change from the last survey, and the forecast index (investment, sales, profitability and staff) is at 105.3, up on the last result of 104.5. Anything over 100 indicates expansion.
Constraints reported were 75% markets, 17% skilled staff and 8% capital.
A net 13% of respondents reported a productivity increase in January.
Staff numbers decreased 4.10% year on year in January.
Supervisors, tradespersons, managers, professional/scientists and operators/labourers reported a moderate shortage.
“2017 has seen a slow start for manufacturers, experiencing falls in both domestic and export sales on January 2016. This comes after a strong end to the year for November and December, though the export sales did experience challenges prior to this in October, September and July.” Said NZMEA Chief Executive Dieter Adam.
“Domestic were flat in January, falling 0.66% on the same month in 2016. The three month average for domestic sales stayed relatively strong at 4.8%. Export sales decreased 3.86% on January 2016, but sales on the three month average measure say an increase of 4.2%, boosted by the impressive increases felt in November and December.
“Sentiment measures were mixed in January – net confidence fell on December, slipping into the negative. In contrast, our index measures of performance and forecast increased, both sitting in expansion, while the change index remained the same as in December. Staff numbers fell 4.10% on January 2016 – this may be a reflection of some of the challenges in export sales over the last 6 months.
“For comparison, in the recent Overseas Merchandise Trade release from Statistics New Zealand, the value of mechanical machinery and equipment exports increased 1.5% in January on the previous month, but remained 5.4% lower than January 2016. Electrical machinery and equipment exports were flat in January, with an increase of 0.3% on the previous month. These did, however, experience a 9.5% drop on January 2016.
“All in all, we need to keep in mind that surveys of the manufacturing sector will be subject to fluctuations. Weak trends at least aren’t that easy to spot, even when looking at quarterly figures. We also need to be aware that our manufacturing sector is quite closely linked to global trends, and that globally there is a lot of uncertainty at the moment, especially where demand for capital goods is concerned. A lot of what our members manufacture are components or sub-systems for capital goods produced overseas.” Said Dieter Adam.
For further comment, contact Dieter Adam, 027 495 3276.
| An NZMEA release | March 07, 2017 ||
The exchange rate hit a two year high on the Trade Weighted Index (TWI) last week. Our consistently overvalued exchange rate continues to be an issue for the competitiveness of manufacturers and the wider tradable sector, and we need to investigate ways to bring it back to a sustainable level over time, say the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive Dieter Adam says, “The exchange rate hit a two year high on the TWI last week, and while it has dropped back less than a cent since, it remains at a level that damages the competitiveness of our manufacturers and tradable sector.
“This is not a new issue – our exchange rate has been consistently overvalued over the last decade, the average of which has been over 10 percent higher than the previous two decades in TWI terms. This does not, however, mean we should accept the current level as inevitable. We need to see some fresh thinking on how to create conditions that can give our economy a more sustainable exchange rate over time, from both the Reserve Bank of New Zealand (RBNZ) and Government.
“A competitive and fairly valued exchange rate is a key component of ensuring our productive manufacturing and exporting sectors can grow over time, bringing quality jobs and much needed export income. The failure to make ground on the Government's target of improving exports to 40% of GDP has no doubt been hampered by the consistent overvaluation.
“In terms of the RBNZ’s OCR decision tomorrow, we believe holding the current rate is the right move. While we are starting to see signs of an inflation uptick, moving rates up prematurely, as we saw in 2014, would add additional pressure onto our exchange rate.
The exchange rate is currently around 4% above what the RBNZ forecast for the upcoming March quarter.” Says Dieter.
| An NZMEA release | February 8, 2017 ||
Palace of the Alhambra, Spain
By: Charles Nathaniel Worsley (1862-1923)
From the collection of Sir Heaton Rhodes
Oil on canvas - 118cm x 162cm
Valued $12,000 - $18,000
Offers invited over $9,000
Contact: Henry Newrick – (+64 ) 27 471 2242
Mount Egmont with Lake
By: John Philemon Backhouse (1845-1908)
Oil on Sea Shell - 13cm x 14cm
Valued $2,000-$3,000
Offers invited over $1,500
Contact: Henry Newrick – (+64 ) 27 471 2242