Confidence boost for Australia’s manufacturing sector

There’s some good news for Australia’s manufacturers according to the latest Australian Chamber-Westpac Survey of Industrial Trends, with the report showing a strong upswing in new home building and home renovation activity providing a confidence boost that has spread to the manufacturing sector.

Combined effect of lower Aussie dollar and low interest rates

Low interest rates are underpinning the surge in new home building and renovation but it’s also the much lower Australian dollar that is helping the manufacturing industry feel buoyant. The Australian Dollar is now at levels around 40% lower than early 2013 and is down by 20% since mid-2014.

The Survey also reports that while these low interest rates are fuelling consumer spending and home building, annual growth figures are just above trend at 3.4%.

According to the Survey’s September quarter results, 25% of survey respondents expect the general business environment to strengthen over the next six months, despite the looming closure of Australia’s car manufacturers and continued contraction in the resources sector.

Other key findings for the manufacturing sector include:

• Manufacturing output advanced for the eighth consecutive quarter
• 24% of respondents said the expected to lift output in the next three months
• The increased housing sector activity is likely to peak in 2016
• Manufacturers’ views on hiring have strengthened since the middle of 2015 and in June, only a net 2% of firms expect to reduce their workforce over the next three months.
• Data highlights that weak wages growth is a feature of the broader Australian labour market and is not confined to any particular sector. Sharp falls in the terms of trade is also having a negative effect on income growth.

The Australian Chamber-Westpac Survey is Australia’s longest running business survey, with the first survey dating back to 1966.

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