FED: Aust manufacturing sector rebounds in Dec qtr survey

AAP General News (Australia)
12-08-1998
FED: Aust manufacturing sector rebounds in Dec qtr survey

CANBERRA, Dec 8 AAP - The outlook in Australias manufacturing sector has rebounded
strongly despite the Asian economic crisis, the latest quarterly survey for the sector today
found.

The December quarter survey by the Australian Chamber of Commerce and Industry and Westpac
said business was less pessimistic about the general business situation.

It said there had been a marked recovery in demand and production in the December quarter,
and growth in these areas was expected to be sustained into 1999.

"This is the best performance in this survey since 1994 - what weve seen is the actual
outcomes exceed the predictions for the the first time since 1994, and growth forecasts look
very strong," ACCI chief executive Mark Paterson told reporters.

"This survey represents good news for Australian businesses, it represents good news for
the Australian economy."

Mr Paterson said the survey revealed a sustained turnaround in outputs, and that export
growth seen in the previous survey had been maintained.

Westpac general manager of economics Bill Evans said labour market levels were as high as
1994, and that there had been a continued fall in prices "which augurs well for the inflation
outlook".

Confidence was driven by a strong increase in sales, with exports doing well and domestic
demand strong, he said.

Asked if this could be sustained, he said: "The economy will be slowing in 1999, but
obviously the strength of this recovery has surprised everybody and we expect there to be
strong momentum going into the first half of 1999."

The five rate cuts - before the latest 25 basis point cut announced last week - had led to
the improved result, he said.

"Weve underestimated the strength of consumers - the consumer, because interest rates
havent been going up, the consumer has continued to spend," he said.

"Everything is in place for sales over the Christmas period to be extremely strong."

The survey said 29 per cent of businesses surveyed predicted a deterioration in the
business situation compared with 47 per cent in the previous quarter, although only 12 per
cent expected an improvement.

The survey revealed an improved outlook for both outputs and exports along with slightly
firmer profit expectations.

Building expenditure plans remained weak though, while plant and equipment expenditure
plans were positive.

It said the outlook for the labour market remained soft.

"Labour-shedding slowed down marginally in the December quarter 1998," it said. "(But) a
further decline in numbers employed is predicted for the March quarter 1999."

Any strength in the labour market was reflected in a pickup in overtime, rather than new
jobs.

The proportion of respondents reporting higher levels of overtime in the December quarter
rose from 14 per cent to 33 per cent.

AAP ear/mfh/it/br

KEYWORD: ECONOMY ACCI

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