Manufacturers are giving a “bleak assessment” of conditions, according to the latest quarterly ACCI-Westpac Industrial Trends Survey, though they intend to lift investment.
The Actual Composite weakened in the latest survey — with results out on Tuesday — down from 53.9 in March to 50.7 in June. This is only just above a break-even result of 50, and “indicates that conditions within the manufacturing sector are stalling,” said Westpac chief economist Bill Evans.
“Notably, the general business mood has become extremely pessimistic with a net 32 per cent of respondents now expecting the business situation to worsen over the next six months. That eclipses the lows seen during the pandemic and is the weakest reading since the Global Financial Crisis,” said Evans.
“Businesses report that the economic outlook remains bleak, as interest rates continue to rise; high inflation reduces real household incomes and margins are squeezed. Conditions in the manufacturing sector are likely to deteriorate further over the period ahead.”
On the upside, manufacturers surveyed said they remained intent on lifting investment. The report explains this as a response to labour shortages and rising average unit costs.
“A net 29 per cent plan to increase spending on equipment,” said Evans.
“That is broadly in line with the highs seen when Australia was first emerging from COVID lockdowns. While this promises to address some of the pressures around capacity and rising labour costs, plans may go on hold if conditions deteriorate further.”
The report can be accessed here.
Picture: credit Australian Made/Maxitrans