I don’t think anyone will be surprised to discover that today’s Westpac ACCI Survey of Industrial Trends finds weakness:
The Westpac–ACCI Actual Composite was virtually unchanged in the June quarter at 47.9, compared to 47.8 three months ago.
• The Expected Composite was also broadly unchanged at 51.7, compared to 51.5 in the March quarter.
• Overall, the June quarter outturn suggests that the manufacturing sector continues to struggle under the weight of the strong Australian dollar, a deterioration in global economic momentum, and weak conditions in construction outside of engineering work, which has grown rapidly on the back of the mining boom.
• The survey’s capacity utilisation measure remains well below ‘normal’. The ‘outlook for general business conditions’ net balance also deteriorated in the June quarter to –21%, well below its 2% historical average.
• On the labour market: the Labour Market Composite fell in the June quarter and continues to point to annual employment growth of less than 1% over the next six months; however, respondents noted that labour was “harder to get” than three months ago.
• Plant & equipment investment intentions improved in the June quarter, but investment intentions for buildings deteriorated.
• After improving in the six months to March, profit expectations deteriorated in the June quarter to be similar to those seen nine months ago – this may be due to concerns over wage cost pressures.
• Unit cost pressures remain a key concern for the manufacturing sector. Respondents reported that unit costs rose in the June quarter and that they expect this trend to continue in the September quarter. Clearly the strong growth in administrative prices, such as utilities, are outweighing any benefits from lower raw material prices.
• In contrast, manufacturers’ pricing power remains extremely limited: on balance, average selling prices were reported to have declined again in the June quarter and are expected to remain unchanged in the next – usually respondents are optimistic and expect prices to rise.
• Actual export conditions deteriorated further in the quarter, likely owing to the continued strength of the Australian dollar and softer global growth.
