Manufacturing sector cautiously optimistic

Australia’s manufacturing sector is cautiously optimistic about the nation’s business climate, according to the latest Australian Chamber of Commerce and Industry (ACCI)-Westpac Survey of Industrial Trends.

22 per cent of respondents said they expect Australia’s general business situation to improve in the next six months, 64 per cent expect it to stay the same and 14 per cent expect it to deteriorate. While optimism is still maintained, the net positive 8 per cent result is down on the net positive 27 per cent found in the previous December-quarter survey.

Respondents showed a higher level of optimism when questioned about their own business. A net positive of 13 per cent of respondent said they are expecting to see an improvement in profit over the next 12 months, a drop from the 23 per cent net positive result registered in the previous quarter.

“The Westpac-ACCI Composite Index rose in the March quarter to 56.2, up 2.0 points from 54.2 in December. This result, the sixth consecutive reading in the expansionary zone, indicates that conditions are improving in the manufacturing sector. The strengthening of the Composite Index is being driven by lifts in new orders, output and overtime but not employment,” Kate Carnell AO, CEO of the ACCI, said in a statement.

“Manufacturing is benefitting from rising residential building activity, some evidence of a lift in services investment, and a sustained depreciation of the Australian dollar, which helps boost both exports and import-competing industries.”

62 per cent of respondents highlighted Orders as the biggest single factor limiting their ability to increase production, followed by Other (16 per cent), Capacity (9 per cent), Finance (4 per cent) and Material (4 per cent).

26 per cent of manufactures are planning to spend more on plant & machinery in the next 12 months, while 17 per cent will be investing more on buildings.

The ACCI said these investment indicators could point to overall additional spending in the next 12 months, a forecast supported by the positive turn in spending seen in late 2014.

Although optimism remains at a positive level, a net 10 per cent of manufacturers said they expect to see their next wage enterprise deal to produce annual rises less than in place under the previous deal.

“Despite the improvement evident in early 2015, the current cycle remains relatively modest by historical standards,” Ms Carnell said.

“A strong upswing in new home building is a key positive, but other parts of the economy are mixed. Consumer spending has improved but remains below trend, home renovation activity is weak, mining investment is turning down sharply, and global fragilities persist.”

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