New Zealand exporters and importers are increasingly collaborating to overcome supply chain disruption - and seize market opportunities, according to ASB international trade consultant, Paul Gestro.
"Many companies who previously didn't talk to each other, have by necessity opened up channels of communication. This is not just through business but also through government," he says.
"What I am seeing now is that companies are collaborating on the product side to find the right markets and are also sharing costs with transport providers. They are just being smarter."
Gestro says despite the easing of Covid-19 induced supply chain disruptions, inflation is now having an impact on recovery and while things may be on the up for exporters and importers, he warns businesses are not yet out of the woods: "It's now a story about real inflation, not a Covid supply chain disruption story.
"Any easing (in the supply chain) will be mopped up by inflationary forces, so don't expect a turnaround for quite a while – may be later 2023 or 2024. However, I'm always an optimist. We've got better at reacting faster, being resilient and able to identify and mitigate risks.
"Coming out of the Covid-19 pandemic businesses have built resilience and are better prepared," he says.
Gestro says demand around the world is easing with global growth hovering around three per cent, down from six per cent last year, taking some pressure off the supply chain.
Although there's been some relief with shipping costs, shipping reliability is tracking at 40 per cent, so it's very hard to confirm arrival of orders with buyers and suppliers, he says.
The combination of supply chain disruption and weakening global demand has hit all sectors in New Zealand, and "we've had significant weather events that affected primary sector production," says Gestro. "Inflation is pushing prices higher, so we receive more for our merchandise exports, but volume is down."
Some dairy and meat products are up around 40 per cent by value but premium products such as wine, seafood and apples are finding it tough with value down between 10 per cent and 20 per cent.
"The biggest thing will be when domestic and global spending picks up. Once that kicks in confidence returns and I think we will turnaround quite quickly," Gestro says.
Consumer inflation is currently tracking at an annual rate of 7.3 per cent – the highest in more than 30 years. Gestro says much of this rise is due to higher costs for imported consumer goods, which have risen 15 per cent since late 2019, and this is expected to rise further.
Higher import prices are hitting businesses as well as consumers. Oil and other raw materials, for instance, have increased up to 25 per cent on pre-Covid levels.
With the rising cost of living continuing to bite consumers in key export markets such as the United States, Europe and Britain, demand for New Zealand's high-end commodities have taken a hit.
In its latest Trade Disruption economic report, ASB said wine and seafood exports were suffering the most with volumes down almost a third on pre-Covid levels.
Meat and dairy exports remained the country's strongest players, though they were still down on previous years. For the year to date, skim milk powder exports were down 10 per cent on last year and beef exports were behind three to seven per cent.
Despite global forestry supply being hampered by the absence of Russian logs, New Zealand logging producers were facing turbulent times. Some 87 per cent of forestry exports were sent to China where a cooling property market is curtailing demand.
Gestro says the labour shortage is still a massive issue for businesses and is affecting production. "There's no easing on the horizon, unfortunately. We have negative migration at the moment and are struggling to get people in, whereas across the ditch in Australia they've got positive migration."
Gestro says New Zealand is still an attractive place. "Our location can be a positive in that we are a long way from troubles around the world. We just need to make sure we can improve things faster, work a bit quicker and keep our cost of living down so it doesn't put people off."
"There are a lot of things we can't control but we can plan for different scenarios," says Gestro. "We can evaluate innovation to help businesses be more efficient; we can develop a very clear go-to-market strategy; we can buffer our inventories to account for shipping delays; and we can focus on cash management.
"We should also be developing new and multiple relationships across supply and logistics so businesses have options to use different transport and supply operators and get their products into markets."
Find out more in the ASB August Trade Disruptions Report.