Manufacturers had a surprisingly strong May, with employment growing for the first time since November 2008 and a solid lift in both export and local sales, according to the latest New Zealand Manufacturers and Exporters Association members' survey.
The findings, completed in mid-June, are at odds with the gloomy assessment
of business conditions revealed in the New Zealand Institute of Economic Research Quarterly Survey of Business Opinion, also released this week.
However, NZMEA chief executive John Walley says it's still too early to be raising interest rates and called on the Reserve Bank of New Zealand to follow the Australian and British central banks' leads and keep interest rates "lower for longer."
"This is probably the most positive survey we have seen since the onset of the global financial crisis," said Walley. "That said, the recovery is fragile, patchy and far from bedded in."
While demand had strengthened in May, "our forward-looking index has softened in line with reports of softening export markets, but for the present sales have improved on last year and job growth is reported for the first time."
The survey covered sales of $374 million, with an export content of 41%, and showed net confidence rising to 50, up from 46 a month earlier, indicating sentiment among respondents is now evenly balanced instead of mildly pessimistic.
Current performance and capacity utilisation measures improved between April and May, but the forward-looking index of performance softened from 108.25 in April to 105 in May. Anything under 100 on the index indicates economic contraction. The index had been in "deep negative territory" since 2005 until recently, Walley said.
The biggest constraint was in market demand, at 70%, while capacity, capital and staff constraints were low at 10% apiece. Job numbers rose 3% in May, for the first time in 19 months.
A fragile world economic outlook, especially because of turmoil in European economies, all encouraged a "wait and see" position on monetary policy, Walley said.
"Pride should not win out over prudence. The RBNZ should signal lower for longer on interest rates."
