The Australian Chamber-Westpac Survey of Industrial Trends, Australia's longest running business survey dating from 1966, provides a timely update on manufacturing and insights into economy-wide trends.
The Westpac-AusChamber Actual Composite index strengthened in March 2017, lifting 2.5pts to 63.0, extending the rebound from a dip to 55.0 in June 2016, coinciding with the July Federal election.
The above par reading for the Composite index, which has trended higher since 2014, reflects strength across new orders, output, overtime, and employment. New orders were particularly strong in Q1, possibly including an element of catch-up after the soft spot in 2016.
Manufacturing is benefitting from: a strong upswing in new home building activity, although rates of growth have moderated; a lift in renovation activity; an increase in competitiveness associated with the sharply lower currency, down 28% against the USD from early 2013 highs; and a strengthening of conditions in manufacturing globally. Even so, there are some negatives. Mining investment is trending lower and consumer spending, while it rebounded in late 2016, has been lacklustre.
The modest uptrend in exports appears to have resumed after stumbling in 2016, with a net 8% of respondents reporting a rise in export deliveries. Expectations are positive, supported by the relatively low AUD, but constrained by weak world trade.
Expectations are positive, centred on new orders and output as well as employment. The Expected Composite index is at 63.8 in March, up 1.6pts from December. A net 37% expect the general business environment to strengthen over the next six months, an upbeat mood, up from 25% in December.
Businesses are looking to 2017 to be a positive year for profits, driven by rising turnover and a lower Australian dollar boosting export returns. A net 31% expect profits to rise in the 12 months ahead.
Equipment investment intentions have been positive over the past two years, consistent with some reduction in the sector's spare capacity and improving profitability. A net 13% of firms expect to increase equipment spending in the next year. Investment plans for building investment are muted at a net +3%.
The survey's Labour Market Composite, which broadly tracks economy wide jobs growth, was 54.5 in March, up from 51.7. A reading at this level points to robust jobs momentum in 2017.
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