KEY POINTS:
New Zealand exporters are facing a challenging year as global economic conditions deteriorate, says credit reporting agency Dun & Bradstreet (D&B).
The impact of global inflationary pressures, declining US consumer demand and the re-pricing of credit were eroding business profit margins and making it more difficult to sell products to key trading nations.
Smaller organisations - which made up the majority of the New Zealand exporting community - were most likely to feel the pressure of deteriorating economic conditions as they were less able to withstand economic headwinds than their larger counterparts, D&B said.
D&B data indicated that more than 80 per cent of this country's exporters sold less than $10 million worth of goods and services a year and the vast majority employed a small number of staff.
The risk associated with small and medium enterprises (SMEs) was generally higher than large organisations because they often relied on a small number of customers in a single export destination.
That affected their ability to diversify risk leaving them significantly more exposed to changes in economic conditions.
"New Zealand's exporters are being hit by a double whammy with high oil prices and inflationary pressures having a direct impact, while the deteriorating economic conditions of key trading partners are indirectly impacting exporting volumes and revenue," D&B said.
The world was in the midst of an extended period of higher structural inflation, with New Zealand's key trading partners battling severe inflationary pressure.
"In an environment of higher oil prices, lower consumer spending and tighter lending standards, the global inflation challenge is forcing exporters to choose between raising prices and risking customer backlash or absorbing the additional costs their business is facing."
Despite declining from historic highs, the New Zealand dollar's strength in recent months has exacerbated the situation for this country's exporters.
Manufacturing and wholesaling industries - two sectors which accounted for more than 70 per cent of the exporting community - would particularly feel the pressure, D&B said.
A pullback in spending in key trading nations on New Zealand imports was explained by deteriorating outlooks in China, Vietnam, India and Britain.
And although the outlook for Australia, the US and Japan was stable, those countries were all facing challenges that were undoubtedly hurting imports.
In D&B's latest global risk indicator, the US and Britain had both been re-rated since the beginning of the year to fall outside the top 10 safest countries in which to do business, while Japan, China, India and Vietnam were ranked 17th, 52nd, 62nd and 78th respectively on the global scale.
A positive amid challenging conditions was Australia third ranking, while New Zealand was ranked 25th.
- NZPA
