NZ exporters and manufacturers cut jobs 19% as orders fall

Confidence held by New Zealand's manufacturing and export sector was less negative in June than in May but export sales and employment continued to fall over the month, with staff numbers down 19% from June 2008, a survey by the New Zealand Manufacturers and Exporters Association (NZMEA) shows. Export sales were reportedly down 19% from the year before, although domestic sales were up 3%. Overall sales fell 6% from June 2008. The June survey sample covered NZ$328 million in annualised sales, with 37% of them export sales. "Overall this month's sales are still getting worse but the rate of deterioration has slowed," NZMEA CEO John Walley said. "Domestic sales have increased for the first time since December last year due to a stabilising housing market and forecasts of domestic growth towards the end of this year, but exports and sustainable medium term growth continue to look weaker. This growth outlook presents further risks to the economy," Walley said.

"Policy settings generally, and in particular the Official Cash Rate (OCR), are driving this outcome. As confidence in the global recovery grows our higher interest rates have seen the re-emergence of the carry trade, which has overvalued our exchange rate. This is hampering the recovery of the tradeable sector," he said. The survey's 'current performance' index (a combination of profitability and cash flow) was 91, up from the previous month's 88.5; The 'change' index (capacity utilisation, staff levels, orders and inventories) increased to 96 from 94 in May, and the 'forecast' index (investment, sales, profitability and staff) was 96, up on the previous month's result of 90. Index scores than 100 indicate a contraction. Overall net sector confidence was negative 27%, better than the negative 58% in May and was the best result for 2009. Staff numbers for June fell by 19% from June 2008, the survey showed. The NZ Household Labour Force Survey released on Thursday showed nationwide unemployment jumped to 6% in the June quarter from 5% in March. "Commentary from respondents reported that order lead times are shortening, last minute decisions are being made, there are few forward orders and some payments are very slow. Generally, capacity is being reduced so overall jobs are lost. A few comments are positive and some have said July figures will be better; for others the 9 day fortnight is helping," Walley said. "We must avoid a return to the unbalanced and unsustainable asset driven consumption of the last cycle. The productivity review with Don Brash, the tax review and what appears to be an increasingly open minded approach from Bill English and John Key present opportunities to better align policy behind the real economy," he said. "Only time will tell if the political will is there to make the necessary changes this time round."