Manufacturing results and expectations remain mixed

The manufacturing sector improved slightly during the June quarter, as the Australian dollar dropped sharply.

However, further results from the June quarter 2013 Australian Chamber of Commerce and Industry (ACCI) – Westpac Survey show that manufacturing sector outcomes and projections have remained mixed with several disappointing aspects.

While remaining marginally positive, the General Business Expectations indicator for the next six months has softened and the employment outlook continues to deteriorate. However, demand and production indicators have strengthened with stronger forward projections.

As such, economists expect that there will be further interest rate cuts by the Reserve Bank of Australia (RBA) in coming months.

The composite index for survey rose to 51.7 points in the June quarter. This was an improvement on the figure of 46.5 points in the previous three months.

A figure of more than 50 points means that the sector is expanding.

Mr Greg Evans, Chief Economist, Australian Chamber of Commerce and Industry, said in a statement, “This Survey clearly underscores that conditions have become increasingly challenging for Australian manufacturers amid weak demand, rising production costs, the lack of pricing power and a still historically strong currency.”

AAP reports that Evans told reporters in Canberra that a composite index in the September quarter of 54.5 points was expected. This is because of depreciation in the dollar and its flow on impact to future competitiveness.

However, he added that there is a still a way to go in the transition from mining investment to broader economic growth.