Australia: Industrial trends survey gives positive signal for jobs and investment - Westpac

Simon Murray, Research Analyst at Westpac notes that the Westpac–AusChamber Actual Composite index strengthened in September 2017, up 1.1pts to 66.1. This extends the rebound from 55.1 in June 2016, a dip coinciding with the July Federal election, he further adds.

Key Quotes

“The Australian Chamber–Westpac Survey of Industrial Trends, Australia's longest running business survey dating from 1966, provides a timely update on manufacturing and insights into economy-wide trends.”

“The above par reading for the Composite index, which has trended higher since 2014, reflects strength in new orders, output, overtime, backlog and employment. September saw maintained strength in output, new orders and employment, while backlog and overtime lifted.”

“Manufacturing is benefitting from: a strong upswing in public infrastructure spending; stronger world growth; a lift in non-residential construction; a still relatively low Australian dollar; and an elevated level of home building activity. Even so, there are some negatives: consumer spending is constrained by slow wage growth; while offshore competition in the manufacturing sector continues to be intense.”

“The modest uptrend in exports has resumed after stumbling in 2016, with a net 8% of firms indicating a rise in export deliveries. Export expectations are moderately positive, coinciding with rising world trade volumes after a period of contraction as well as continued support from a relatively low AUD.”

“Expectations are positive, centred on new orders and output as well as backlog and overtime. The Expected Composite is at 65.2 in September, down slightly from 65.7 in June. A net 35% expect the general business environment to strengthen over the next six months, continuing the upbeat mood.”

“Equipment investment intentions of respondents have been positive over recent years in response to rising demand and consistent with some reduction in the sector's spare capacity, as well as improving profitability. A net 17% expect to increase equipment investment in the next year. Building intentions have dipped to a net –3%, down from 9% in June.”

“The survey's Labour Market Composite, which broadly tracks economy-wide jobs growth, is at 60.1 in September, pointing to continued solid jobs growth in 2017. The index correctly foreshadowed the acceleration in Australian employment evident in the first half of this year.”