SYDNEY, Sept 20 (Reuters) - Australian industry is experiencing a welcome pickup in activity after a long period of struggle, a survey showed on Thursday, and firms are hopeful the recovery will extend for a few months more.
The quarterly survey from Westpac and the Australian Chamber of Commerce and Industry (ACCI) found overall activity expanded for the first time since the first quarter of 2011, helped in part by cuts in interest rates in May and June.
The survey’s Actual Composite index of conditions rose to 52.4 for the third quarter, up from 48.3 the previous quarter. The Expected Composite index, measuring the outlook for the next six months, also improved to 53.7, from 51.5.
“The improvement seen in the September quarter is surprising but welcome,” said Westpac economist Elliot Clarke. “Clearly the rate cuts provided by the RBA over the past year have benefited the sector directly and indirectly.”
The Reserve Bank of Australia (RBA) has cut its cash rate by 125 basis points since November last year, taking it down to an historically low 3.5 percent.
“While the Australian dollar remains a significant concern for the sector, projected interest rate cuts will assist in bringing about more appropriate financial conditions,” said Clarke.
The central bank has indicated it could ease gain if necessary and markets are priced for a move to 3.25 percent by November, if not next month.
Expectations of ‘general business conditions’ improved significantly in the September quarter, with a net 11 percent of respondents now expecting that conditions will improve over the next six months. That compares with a net 21 percent who expected conditions to deteriorate three months ago.
“The recent signs of stabilisation in residential and non-residential construction have been particularly welcome developments, giving manufacturers greater confidence,” said Clarke.
The survey’s measure of labour demand increased in the quarter, though that was mostly due to a sharp rise in the use of overtime rather than new hiring.
Measures of inflation pressures in the survey remained subdued. Manufacturing wage expectations eased back after a spike in the second quarter, while growth in input costs moderated. Average selling prices fell for the fifth consecutive quarter.
Manufacturers were also more optimistic on the outlook for profits, with a net 13 percent of expecting their profitability will improve. (Reporting by Wayne Cole)