Some good news on a gloomy day:
The Westpac–ACCI Survey of Industrial Trends, the longest running business survey in Australia, dating back to 1966, continues to provide a timely update on economic conditions and prospects. The survey reports that economic conditions for the manufacturing sector remained relatively subdued in the June quarter.
The Westpac–ACCI Actual composite index was 51.7 in the June quarter, up 5.2pts from 46.5 in the opening three months of 2013. A reading of 51.7 indicates modest growth, which will only partially unwind some of the ground lost in the previous quarter.
New orders improved to a net balance of +9%. This may suggest that the upturn in new housing construction is beginning to filter through to the broader economy. However, this improvement is from a weak starting position, with a net balance of –7% recorded in the March quarter.
The survey captures the period in which the Australian dollar weakened sharply, down around 7¢ against the USD. Notwithstanding this, exports declined in the June quarter and export expectations deteriorated. The currency is still relatively high, and perhaps more importantly, global demand is subdued.
Labour market conditions are set to remain soft, the survey finds. The upward trend in the unemployment rate is likely to continue. Manufacturers reduced employee numbers in the June quarter, and plan to lower their headcount again in the September quarter.
The Westpac–ACCI Labour Market Composite, which has historically given a reliable guide to economy–wide job prospects, remained negative and suggests that jobs will fail to keep pace with population growth. Firms are responding to fluctuations in new orders by managing overtime.
Excess spare capacity persists, with the capacity utilisation level in the June quarter remaining below its long–run average, albeit a little above the March reading.
On wages and prices, the survey confirms that inflation remains particularly benign. A net 9% of respondents report that they expect their next wage deal will result in wage growth below the last.
Business profits remain under pressure, reflecting both underwhelming sales and margin compression. Investment intentions remain weak, with capacity utilisation below average.
Not sure why this bounce hasn’t shown up in any other indicators but I’ll take it.
