The reported deterioration however failed to prevent business sentiment registering an improvement compared to the previous quarter. Despite the reported improvement however, business sentiment is now noticeably lower than the corresponding outcome a year ago.
According to Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, reported industry outcomes for the March 2011 quarter were once again below expected outcomes for a range of economic indicators for the 13th consecutive quarter.
Pivotal March 2011 quarter developments reported by the survey respondents include:
- Reduced orders and production;
- Reduced sales and net profits;
- Reduced employment and overtime levels;
- Reduced investment in buildings but increased investment in plant and machinery during the past six months;
- Finance reported harder to obtain for the 13th consecutive quarter;
- Labour availability reported to have deteriorated for the 5th consecutive quarter;
- Moderating material and wage cost pressures;
- Selling prices reported to have fallen for the 41st consecutive quarter;
- Reduced levels of raw material stock levels: and
- Increased numbers of outstanding debtors.
On the critical indicator of capacity utilisation rates, the March 2011 quarter result shows that just 51.9 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, and outcome that is lower than the 58.9 per cent proportion reported this time last year.
Some 88.9 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is higher than the 85.7 per cent proportion reported during March quarter 2010
According to Mr Tchamkertenian over the outlook period industry respondents are forecasting net balance improvements to take place in a number of key economic indicators.
Based on these forecasts the June 2011quarter is expected to yield the following results:
- Reasonable net balance increases in orders, production, sales and net profits;
- Reduced employment and overtime levels;
- Reduced availability of finance and labour;
- Lower selling prices;
- Reduced stock levels;
- Further net balance increases in all production cost categories - average wages, other labour costs, and average material costs; and
- Increased number of outstanding debtors.
Over the next six months (June and September 2011 quarters) the survey respondents expect:
- Increased investment in plant and machinery investments; and
- Reduced investment activity in buildings.
Respondents from South Australia reported the highest utilisation rates with 78.6 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from Victoria (58.6 per cent), Tasmania (50.0 per cent), Western Australia (45.5 per cent), New South Wales (43.3 per cent) and Queensland (43.3 per cent).
The outlook for general business expectations over the next six months remains favourable across most states. The most optimistic state over the outlook period is Western Australia with a net balance of 54.6 per cent followed by Victoria with a net balance of 27.6 per cent.
Most sectors are forecasting improvements to take place in general business conditions during the next six months. Going against the forecast include the Folding Cartons sector (deterioration forecast) and the Business Forms and Continuous Stationery, Books, Magazines, Periodicals and Newspapers and Trade Binding sectors which are forecasting no change.
Over the outlook period the most optimistic sectors are the Graphic Reproduction and Graphic Arts Machinery and Supplies.
According to the March 2011 quarter outcome capacity utilisation/activity levels were reported as being higher in the Labels, Graphic Reproduction, and Books, Magazines, Periodicals and Newspapers sectors. Considerable levels of excess capacity were reported in the Screen Printing, Other Packaging and Paper Converting, and Folding Cartons sectors.
With most sectors reporting increased investment or no change in plant and machinery, reported deteriorations were confined to the Greeting Cards, Calendars and Diaries and Trade Binding sectors during the six months to March 2011.
The product sectors are either forecasting increased investment or no change in plant and machinery over the next six months, while the Greeting Cards, Calendars and Diaries, General Promotional and Commercial and Screen Printing sectors are forecasting reduced investments.
In terms of emerging trends, capacity utilisation rates keep moving in line with changes in trading conditions. With trading conditions falling during the quarter capacity utilisation rates fell to a six quarter low. In the area of production costs and specifically material costs, the strong Australian dollar continues to provide relief. Wages which represent another significant cost area moderated significantly during the quarter but selling prices continue to come under pressure.
Mr Tchamkertenian said differences in performance and intentions were also evident based on company size.
“Mid-size businesses are more optimistic about business conditions then their smaller and larger counterparts. But when it comes to capital expenditure intentions, the larger businesses still have positive sentiments” he said.
“In the area of employment intentions, smaller establishments are forecasting increased workforces while labour shedding intentions seem to be concentrated amongst mid to large sized businesses” added Mr Tchamkertenian.
According to Mr Tchamkertenian the March 2011 quarter outcomes may have been influenced by both seasonal influences as well as the general softness in economic conditions.
Any one interested in obtaining a copy of the full survey report can contact Printing Industries¬. Hard copies of the report cost $20 for Printing Industries members and $40 for non-members. Electronic copies of the report are also available on request and cost $20 for members and $40 for non-members. Annual subscription to Printing Industry Trends Report is $60 for members and $120 for non-members.
Printing Industries Association of Australia
www.printnet.com.au
