Dwindling demand sinks growth expectations
Industry leaders forecast a bleak outlook for 2024 and are making productivity a focus to cope, Ai Group says.
Business expectations are at their lowest level in a decade with weakening demand seen as the greatest challenge this year, according to employer association Australian Industry Group.
Almost 40 per cent of business leaders surveyed by Ai Group said demand constraints were their primary concern, up 20 per cent from last year, followed by cost pressures at 34 per cent (down from 46 per cent).
“Uncertainty, ongoing supply-side constraints and weakening demand will be the main inhibitors in the coming year,” the CEO Expectations Survey said.
“While uncertainty and supply constraints have been common since the pandemic, a weak industrial demand outlook for 2024 is a concerning new development.”
As a result, 40 per cent expected weaker business conditions this year, while only about one-fifth expected an improvement.
CEO Innes Willox said these sentiments led to “the lowest outlook seen in the Ai Group survey since the end of the mining boom” in 2013.
When respondents were asked what they were most optimistic or concerned about, responses “coalesced around 10 factors, relating to all aspects of business operations”, with eight carrying a negative sentiment, the report said.
Businesses rated customer demand negatively (-13 score) in a “clear shift” to downside expectations. “Industry leaders do not expect the demand side to remain as strong into 2024,” it said.
This reversed a dynamic seen since 2020 where strong demand drove growth, but supply disruptions and labour shortages constrained it.
Survey respondents also gave the factors “level of uncertainty” a -80 net sentiment score and input costs a -96 score.
Businesses’ revenue expectations scored poorly with about one-half anticipating an increase in revenue and 21 per cent anticipating a decrease. “This is a low score for the revenue expectations indicator, and similar to that seen during the pessimism of 2019,” the report said.
Ai Group found businesses also evinced the “weakest set of investment intentions since 2015”.
Technology was the highest-ranked investment priority with about one in two businesses intending to raise their spend and only 11 per cent cutting back. One in two businesses said they would maintain their staff training levels, two-thirds would maintain their R&D investments, while 19 per cent planned to invest more.
“Industry leaders are making productivity a focus to survive in this more difficult environment,” Mr Willox said.
“They plan to invest in technology and innovation, focus on business improvement to better control costs, and will invest in upgrading the skills of their current workforce.”
Ai Group's 2024 survey was conducted between October and November last year. Responses were received from leaders of 320 private businesses in manufacturing, construction, technology, supply chain and technical services.
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