High dollar sours sales increase for exporters

Higher revenue for manufacturers and exporters is being eroded by the high kiwi dollar, a business group says.

The New Zealand Manufacturers and Exporters Association's latest business conditions survey said total May sales increased 15 per cent on the same month in 2010. Export sales increased 22 per cent, while domestic revenue lifted 10 per cent.

The association's chief executive John Walley said the increase in sales was positive.

"It's better to be up than down - and that suggests there's a little bit of demand coming back into the market," he said.

"Sadly, however, with the currency there isn't much return [for exporters] from that effort."

The New Zealand dollar was trading at US82.82c against the greenback, 51.65p against the pound and 0.57250 against the euro last night.

Chris Hopkins, managing director of Dunedin-based manufacturer Scott Technology, said last week the strength of the kiwi dollar against currencies like the greenback was having a dramatic impact on NZX-listed business.

"A lot of our sales are denominated in US dollars," he said.

Walley cited state-owned KiwiRail's decision to outsource the manufacturing of $500 million of new railway carriages to China as an example of the impact the exchange rate was having on New Zealand firms.

The Rail & Maritime Transport Union blamed the loss of 70 jobs in Dunedin and Lower Hutt on the import of Chinese-made wagons, and planned to picket the arrival of wagons at the Port of Tauranga this month, the Otago Daily Times reported.

Walley said: "A competitive exchange rate would have seen this work remain in New Zealand. Effectively, the Government is choosing short-term spending power over long-term jobs and capacity development by completely ignoring the exchange rate in its Policy Targets Agreement with the Reserve Bank."

Net confidence fell sharply to -33 from 13 in the previous survey. Walley said that may have been influenced by the June 13 Canterbury aftershocks.

Sixty per cent of respondents were Christchurch-based businesses.

"Christchurch manufacturers are continuing to report some difficulties getting insurance with some still waiting on business interruption payments from February."

Walley said the fall in confidence showed respondents were worried about the fragility of the economic recovery in the US and Europe.

The survey's performance index for May - a combination of profitability and cash flow - was at 102, up from 99.5 in April. Any score lower than 100 indicates a contraction.

The survey sample covered $382 million in annualised sales, with an export content of 45 per cent.

SALES BOOST

Business conditions survey:

* Total sales up 15 per cent in May, compared with May 2010.
* Export sales increased 22 per cent, while domestic revenue lifted by 10 per cent.
* Staff numbers for May increased 1.8 per cent.