Manufacturers optimistic despite supply challenges, report reveals
Manufacturers continue to face supply-side challenges but "pockets of opportunity" are starting to emerge, according to the latest ACCI–Westpac Business Survey.
The most recent version of the ACCI–Westpac Business Survey has highlighted conditions are beginning to show signs of improvement in the manufacturing sector.
According to the report, the ACCI–Westpac actual composite “gathered momentum” into the second half of the year having increased to 56.0 in September, up from 54.6 in June.
Westpac economist Ryan Wells said manufacturers are finding silver linings amid a tough backdrop for the broader economy and lingering supply-side challenges.
“Having moved above the breakeven threshold of 50, conditions are beginning to show signs of improving in the manufacturing sector,” Wells said.
“The September survey reported an ongoing recovery in new orders, a consolidation in output and a bounce in overtime, but a decline in employment.”
The report stated growth in new orders was “firmer” than expected, with a net 20 per cent of companies reporting a rise in September.
Output growth remained somewhat unchanged over the period, as only 14 per cent reported an increase.
It was also found the expected composite was virtually unchanged, ticking down slightly from 53.0 in June to 52.9 in September, yet this was offset by supply-side issues.
Wells said this indicated that companies expect demand conditions to improve at a modest pace.
“The survey finds that cost pressures facing manufacturers remain acute and incredibly volatile,” he said.
“The mood of manufacturers about the general business outlook for the next six months improved but remains deeply pessimistic.”
The results indicated a “degree of ongoing margin squeeze in the sector” as a net 26 per cent of manufacturers reported a rise in costs.
Investment intentions are at a “historic high” with a net 36 per cent and 22 per cent of respondents revealing they want to increase investment spending on equipment and building over the next 12 months, results revealed.
ACCI chief executive officer Andrew McKellar said the results further demonstrate the challenges and costs of doing business.
“While manufacturers may be experiencing pockets of opportunity, the growth in new orders is modest,” McKellar said.
“On just about every category which makes up the index, results are still well down on pre-pandemic levels.”
McKellar noted inflation and regulation are the biggest “killers” for businesses and more needs to be done to reduce this pressure.
“Fiscal policy at both the state and federal level must work in tandem with monetary policy to ensure inflation is brought down in a reasonable timeframe.”
“There also needs to be discussion around reforming the tax system to make it fitter for purpose and reducing red tape which is strangling business.”
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