Australia: Survey of Industrial Trends continues to improve in Q2 2017 - Westpac

The Westpac-Aus Chamber Actual Composite index strengthened in June 2017, rising 1.8pts to 65.0, extending the rebound from a dip to 55.1 in June 2016, coinciding with the July Federal election, notes Simon Murray, Research Analyst at Westpac.

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 across output, new orders, overtime and employment. Output improved significantly in the quarter, matching the strength in new orders.”

“Manufacturing is benefitting from: increased state spending on infrastructure, stronger world growth, spillover effects from a positive income shock to mining and agriculture, an increase in international competitiveness due to a lower currency, recent gains in commercial construction and an upswing in home building - though growth has moderated. Even so, there are some negatives: consumer spending is constrained by slow wage growth, energy costs are up and overseas competition is intense.”

“The modest uptrend in exports has resumed after stumbling in 2016, with a net 12% of firms reporting a rise in export deliveries. Expectations are modestly positive, supported by a lower AUD and a rise in world trade volumes after a long period of contraction, though restricted by international pressures.”

“Expectations are positive, centred on new orders and output as well as employment. The Expected Composite is at 65.9 in June, up 2.1pts from March. A net 28% expect the general business environment to strengthen over the next six months, an upbeat mood, but not as optimistic as March's 37%.”

“Businesses continue to see a positive year for profits, driven by rising turnover and a lower Australian dollar boosting export returns. A net 33% expect profits to rise in the coming twelve months.”

“The survey's Labour Market Composite, which broadly tracks economy-wide jobs growth, was 58.4 in June, pointing to robust jobs momentum through 2017.”