Industry, business sagging — survey

Press, 12 July 1979, Page 3

Industry, business sagging — survey

Wellington reporter Industry in New Zealand was worse off at the end of 1978 than at the beginning of the year, and the squeezing of free enterprise will continue to become more intolerable, according to a state of business survey made for the Chambers of Commerce by the Wellington firm of Barr, Burgess, and Stewart. The survey’s findings were disclosed in Wellington yesterday. Business activity fell sharply in the year ended June 30, 1978. Growth in the value of sales fell from 16.3 per cent in 1976-77 to 7.5 per cent in 1977-78, which was substantially less than the rate of inflation. This adds support to other estimates indicating a fall in the physical volume of business of about 3.5 per cent, which compares with the estimate by the Government Statistician of a fall in gross domestic product of 2.9 per cent. The sharp reversal in fortunes was foreshadowed by the similar survey made last year. Working profit as a percentage of total working assets fell from 12.68 per

cent in 1976-77 to 11.04 per cent in 1977-78; working profit as a percentage of sales fell from 7.73 per cent to 6.79 per cent; and taxpaid profit as a percentage of shareholders’ funds fell from 13.75 per cent to 10.45 per cent. The rate of shareholders’ funds to total assets rose from 41.8 per cent in 197677 tc 43.8 per cent in 197778, but this is because, as business activity fell, fixed figures such as shareholders’ funds comprise a higher percentage. Concern was shown about the continuing growth in the proportion of working profit absorbed by interest and the interest component of rental payments. Over the 12 months the median rose from 22.2 per cent to 23.4 per cent, and for private companies it had risen from 20 per cent to more than 30 per cent in two years. An increase in labour productivity was indicated in all sectors except wholesaleretail, where a sharp decline in productivity occurred. A study of employee numbers showed an over-all decline in employment of 1.5 per cent. Manufacturing was

down 7 per cent and construction 9.6 per cent. The figures showed that almost $30,000 is needed to provide one job. Total working assets per employee rose from $26,254 to $29,434, a rise of 12.1 per cent. Working profit per employee rose 6.9 per cent to $3239, wages per employee rose 13.4 per cent to $7557, sales per employee rose 15.2 per cent to $45,129, and fixed assets per employee rose 14.7 per cent to $10,746. The 13.4 per cent increase in wages per employee reflected the increase of 13.2 per cent in private sector wages for 1977-78 recently noted by the Government Statistician, who also recorded that Government salaries had risen 18.8 per cent in the same period. The physical volume of business declined in 1977-78 and brought with it a significant reduction in profitability, the survey said. Inflation was still the big problem confronting business, which was ill-placed to meet the consequences of the present resurgence in inflation rates in New Zealand and overseas.