Greg Evans, director at the Australian Chamber of Commerce and Industry. Photo source: ACCI

The March quarter 2011 ACCI-Westpac survey of industrial trends has shown a marked upswing in general business expectations.

Greg Evans, director at the Australian Chamber of Commerce and Industry, says the overall outlook suggests that activity in the manufacturing sector is expected to pick up despite the moderation in output growth in the quarter due to flooding around the country. "Capital spending plans for plant and equipment are much stronger, while investment intentions for buildings and structures have firmed slightly."

"The actual and projected net employment and overtime worked indicators have strengthened significantly. Labour tightness is also rising, with a net 14% of the manufacturers surveyed reporting difficulties with recruiting new labour and only 3% finding this easier. The proportion of respondents reporting finance harder to get has eased but remains significant (17%)."

He warns that cost indicators are rising at more than twice the predicted rate, and may fuel inflationary pressures.

Almost a quarter of the respondents (23%) have reported cost increases, while only 8% have been able to reduce costs. "This contrasts with declining selling prices and puts increasing pressure on shrinking profit margins.

"The impact of the stronger Australian dollar also continues to put pressure on the profitability and sustainability of many manufacturing businesses."