Business sentiment continues downhill run

Latest ACCI-Westpac Quarterly Survey of Industrial Trends reveals a further downturn of general business expectations

Business sentiment continues downhill run
Business sentiment continues downhill run

September 22, 2011

The latest ACCI-Westpac Quarterly Survey of Industrial Trends reveals a further downturn of general business expectations in the next six months.

September quarter results show a softening in actual net outcomes for new orders and output, while forward projections remain modestly positive.

The still marginally negative net export deliveries indicator has remained virtually unchanged over the quarter, although predictions for the next three months have softened.

Profit expectations for the next 12 months have also declined to their lowest level for more than two years, with profit margins being increasingly squeezed as manufacturers continue to face cost increases coupled with an inability to pass them on in higher prices.

ACCI Director of Economics and Industry Policy, Greg Evans, says most actual and projected results of the survey are well short of earlier predictions and "clearly disappointing".

He says the basic message is that overall business conditions are deteriorating for Australian manufacturers.

"Activity indicators and growth expectations are more subdued than three months ago and concerns over escalating political and economic uncertainties and rising global concerns have continued to dampen demand and investment plans."

According to the survey, only 17 percent of the manufacturers surveyed intend to increase their capital expenditure in the next 12 months.

Evans says it is also concerning that employment outlook in the manufacturing sector deteriorated further compared to June quarter predictions.

"Given the weak business conditions and uncertain outlook in the manufacturing sector, it is not the time for the Government to add further cost impost in the form of a carbon tax and put Australian manufacturers at an economic disadvantage compared to their foreign competitors," he says.

"In these economic circumstances, manufacturers would clearly welcome a rate cut to ease cost pressures and help improve overall demand conditions."

Investment intentions for plant and equipment and buildings for the next 12 months are again well down, according to the quarterly survey.

In line with predictions, the net employment indicator has remained virtually unchanged but a substantial softening is predicted for the next three months.

Both the actual and projected overtime worked indicators have remained virtually unchanged and marginally positive.

Contrary to expectations, the net outcome for average selling prices declined and a similar result is predicted for the December quarter.

While the net average unit costs indicator has risen more than predicted, cost pressure is expected to ease over the next three months.

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