Manufacturing business confidence at record low

THE Australian Chamber of Commerce and Industry’s January 2013 Survey of Investor Confidence indicates continued weakness and pessimism for the manufacturing industry.

The survey had 595 respondents from the manufacturing and construction industries, and covered the three months to December 2012. It found while actual business conditions have seen marginal improvements, business confidence is at record lows.

The main factors impacting the business confidence of manufacturers are the strong Australian dollar and the soft growth for sectors not related to mining.

In particular, manufacturing businesses indicated that they are becoming increasingly pessimistic about Australia’s economic performance and the climate for business investment.

Government red tape, charges and taxes are seen as the largest constraints on business investment.

According to Greg Evans, Chief Economist at ACCI, the recent rate cuts by the Reserve Bank are viewed as insufficient by the manufacturing industry.

“Businesses consider more needs to be done to lift business confidence in 2013, including further rate relief,” Evans said. “Intrusive regulation and business taxes are also weighing heavily on the investment outlook.”

According to the ACCI, some of the surveyed business indicators are now at record low levels since the survey started in 1998, and with the exception of the Expected Unemployment Rate, all indicators are below their five-year averages over the quarter.

While the current indexes of Own Business Conditions, Sales and Profitability improved over the December quarter, expectations for the March quarter of 2013 have continued to decline to their new record low levels.

The index of Expected Number of Full-Time Employees fell to its 15-year low in December, meaning most manufacturers will be likely to downsize their workforce, and not hire new staff during the first half of 2013.

The actual indicator for National Economic Conditions recovered marginally from its historic low in December, while the Climate for Investment index declined to its lowest level in the survey’s 15 year history.

This latter indicator means manufacturers are also unlikely to be investing in new capabilities and equipment during the first half of 2013.