DOWN THE LINE – Tima September ‘24 Newsletter
In this newsletter we review the latest PMI data here & overseas, NZEIR Quarterly Business Survey, Manufacturing GDP, and our Productivity & Performance Review and Transformation Programme to lift your company's Productivity & Performance.
Performance Manufacturing Index (PMI)
NZ August PMI – Still in reverse !!!
The seasonally adjusted PMI for August was up 4.1% to 45.8, from 44.0 in July, still significantly below the long-term average of 52.6.? ?The sector has now been in contraction for 18 consecutive months, which continues to be the worst period on record with the last being the GFC (May 2008 – August 2009).?? Note a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining.
BusinessNZ’s Director, Advocacy Catherine Beard said that the PMI is heading back in the right direction, but the pathway to eventual expansion after a year and a half being ?rmly in contraction mode means there is still some way to go. “The key sub-index results for Production (46.3) and New Orders (46.8) were both the strongest they have been in a few months, with the former improving signi?cantly from June. Employment (46.6) recovered somewhat from its June/July dip, while Finished Stocks (46.2) was all but unchanged from July". Given the ongoing improvement in activity for August, the proportion of negative comments stood at 64.2% for the current month, compared with 71.1% in July and 76.3% in June. Negative comments typically focused on the general economic recession, including lack of demand and cost of living.
BNZ’s Senior Economist Doug Steel said that ‘while the August result is far from good, there have been some positive developments. Business confidence has improved further following the Reserve Bank of New Zealand’s OCR cut in August. While falling interest rates will support demand, it will take time for the lower OCR to generate a pick-up in sales. We anticipate Q2 GDP figures to include an expansion in the manufacturing component for the quarter, driven by gains in some individual industries like Transport and Machinery Equipment, but more general weakness to be evident with annual growth still clearly negative.’
QSBO equally weak
NZIER’s September Quarterly Survey of Business Opinion – ‘the manufacturing sector is downbeat, with a net 37 percent of the manufacturers surveyed feeling pessimistic about the general economic conditions over the coming months. This pessimism continues to be driven by the weak demand and profitability facing the manufacturing sector. However, a significant proportion of manufacturers are expecting a recovery in demand in the coming quarter.’
Tima has solutions to turn your company around ...
What we have observed is that from a regional point of view all 4 regions are below 50, with 3 regions seem to be yo-yoing with some big swings. The EMA up 19% to 48.2, Southland up 21.8% to 48.1, Business Central down (9.4%) to 42.4, and Canterbury down (4.7%) to 44.9.
Over the last 12 months Southland scoring over 50, being in expansion mode, 5 times and Canterbury 5, yet at the other end of the scale where manufacturing is ‘contracting’, Business Central which covers Taranaki across to Hawkes Bay, lower North Island and down to Top of the South Island has contracted 11 months of the last 12 months and the EMA has contracted straight? 9 months, with only 1 expansion in last 12 months.
The table of regional averages below shows that despite individual monthly results, shows this month 2023 / 2024 average has been a difficult period when compared to previous 3 years and longer run. The continued lack of long run ‘expansion’ of productivity from NZ’s biggest manufacturing base, the EMA region is troubling.
Australia PMI
So how do we compare to our Aussie Battlers across the ditch ?
The Judo Bank Flash Australia Manufacturing PMI dropped to 46.7 in September 2024 from 48.5 in August, pointing to the eighth consecutive month of contraction in manufacturing activity and at the fastest pace since May 2020.
New orders and production also fell at the quickest pace in 52 months amid softening demand conditions. This included external demand with export orders returning to contraction in September. This prompted manufacturers to cut back on their purchases and reduce their inventories. Moreover, headcounts declined for a fourth straight month amid a lack of pressure on capacity.
Turning to prices, average input costs and output prices continued to rise, but at softer rates compared to August.
Lastly, overall confidence in the goods producing sector fell for the first time in three months as concerns heightened surrounding the outlook for sales amid current market conditions. source: S&P Global
Whilst we fell off the cliff in June, we are climbing back….. However, the average for February 23 – Aug 24 NZ is 2 points off Australia (ave PMI) at 46.6, whilst they have averaged 48.6 over the same period.
The Rest of the World - PMI
So how do rank against our competitors when it comes to manufacturing from a PMI point of view…
With a 5 mth average PMI, we are struggling at 45.4, but by comparison manufacturers in leads the pack at UK 51.2, China 51.0, US 50.1, Japan 49.8, Australia 48.5 and EuroZone 46.0…
The Manufacturing GDP
Whilst the economy shrank by -0.2% for the June Quarter…. The biggest mover in the June Quarter was that Manufacturing grew by 1.9% or $102m beating Financial Services which grew by 1% or $37m.? The Manufacturing sector growth from transport equipment, machinery, and equipment manufacturing.
CPI & OCR
The prospect of Stagflation is still real as inflation is still high, although the CPI did drop (17 July 2024) to 3.3% for the 12 months to June.? The next CPI quarter September 2024 will be released on 16 October 2024.
The RBNZ dropped the OCR 0.25pts to 5.25% (14 August 2024), whilst there has been some instant relief in housing market, the OCR is still high and as the RBNZ only meets 7 times a year (9 Oct, 27 Nov, 19 Feb, 9 April, 28 May, 9 July, 20 Aug) at this rate the OCR will take 20 months to get to the covid period OCR low of 0.25% (March 2020 to Sept 2021).?
During the GFC May 2008 – Aug 2009 years we had OCR of 8.25% June 2008, which took only to April 2009 to get to 2.5%, so there is a precedent for 0.5% to 1.5% drops.
I do wonder though if the RBNZ OCR announcements should be after the CPI release ??
Government
Whilst the UAE Free Trade Agreement has concluded, yet to be legislated https://www.beehive.govt.nz/release/new-zealand-concludes-trade-agreement-uae however with the current factory shutdowns (much more to come) and Government saying ‘It’s Business Decision’, ‘It’s the last Government’ and the lack of any strategy to turn around and grow the Manufacturing Sector, you’re on your own ….
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How Tima can help you to thrive and survive the recession
Whilst the Government doesn’t have any help on the horizon, we have two main ways we Tima can assist your company to Thrive and Survive the Recession, being Manufacturing Productivity & Performance Review and Transformation Programme and our Technology.
Our productivity solution that will get you through Recession and Thrive on the other side…
This is a 'Whole of Factory' focused process review, which entails reviewing all aspects of the manufacturing process including supply chain and your people, to ensure that whatever the products that the company is manufacturing is at optimal productivity, that they have the right people, the right strategy and the right tools to perform and through our extensive experience and networks we will assist with rectifying the identified needs.
Our globally seasoned executives who are GM’s, Manufacturing Managers, Factory Managers, Production Managers, NPD, CI, Engineering, Supply Chain, Marketing, Sales, IT & CFO’s solve Manufacturing Process & Productivity issues in;
What you get from our Review:
Our follow-on Transformation Programmes result in;
2. Technology
Apologies for any technology self-promotion however our Manufacturing Execution System www.esCollate.com can assist management with your factory productivity…
Responsive & Real-Time
esCollate streamlines the flow of information with
Designed for People & Productivity
User friendly touch screens to custom event logging (root cause, waste & people cost etc) to support the automated event logging. ?The logging functions, with the display of key production documentation allows for paperwork to be eliminated from the factory floor.
Focus on Productivity & Communication
esCollate motivates and engages all factory employees (incl Operations, Planning, Engineering, QA, etc) by providing real-time messaging between factory team members & by the productivity feedback on local production performance, to manage your Factory Teams & resources.
Accurate & detailed reporting of Production Performance Metrics, allows management to make real time decisions to reduce downtime, improve production and productivity.
Our Successes
We would like to feature some examples of our success,
Spice Co
Implementing esCollate & Tima services, over the course of a week they increased production across all shifts by 87.5%.
Fish Co
A Fish co had the opportunity to win a major contract to supply NZ & Australia Fast Food chain with a key product. The Fish Co implemented esCollate & Tima's services and doubled production from existing shifts in 6 weeks.
Biscuit Co
A biscuit co had purchased a biscuit line made for US manufacturing of biscuits vs Australasian manufacturing. The US vendor was experiencing all sorts of problems they had not experienced before. With the implementation of esCollate and Tima's services over the course of the year post commissioning production doubled.
Canning Co
Implementing Tima's services & providing real time data from esCollate to all departments, the canning lines were able to reduce downtime by 78% and keep it in check. Just as importantly, they were able to increase OEE by 54% over the course of the first 2mths of implementation. Prior to implementation the canning lines had not been above 50% OEE.
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If your Productivity, Margins, Profitability and your Staff Morale is falling, then book a Manufacturing Productivity & Performance Review today and we will turn your company around !
For more info contact Mark Edwards on 0274 833 275, email [email protected] ?or visit www.tima.co.nz