Business confidence falls to three-year low: Hagop's commentary

The December 2007 quarter report of the Printing Industry Trends Survey shows that business confidence declined compared to both the previous quarter and the corresponding period a year ago and now is at a three-year low.

Participant companies from all states and originating from 16 printing and associated sectors covering the printing industry value chain participated in the December 2007 quarter Printing Industry Trends Survey.

According to Hagop Tchamkertenian, Printing Industries national manager for policy and government relations, the industry optimism of last quarter was reflected in actual trading outcomes reported during the December quarter. Actual outcomes for a range of key economic indicators such as orders, production, sales, net profits, and overtime were above expected outcomes.

On the critical issue of capacity utilisation rates, the December 2007 quarter results show that 71.7 per cent of respondents were operating at capacity levels of 70.0 per cent or over, up from the 64.0 per cent proportion reported last quarter but marginally below the 72.1 per cent proportion reported this time last year.

The December 2007 quarter revealed that 74.3 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is lower than the 79.8 per cent proportion reported during the September 2007 quarter, and lower than the 80.3 per cent proportion reported during December quarter 2006.

Hagop reported that over the outlook period industry respondents are forecasting modest net balance improvements to take place in a number of key economic indicators.

The outlook for general business expectations over the next six months remains favourable in most states. The most optimistic state is Western Australia with a net balance of 33.3 per cent followed by South Australia with a net balance of 16.7 per cent.

Respondents from Queensland reported the highest utilisation rates followed by respondents from Western Australia and Victoria. Idle capacity was a problem for respondents in New South Wales Tasmania and South Australia.

The December 2007 quarter report shows high capacity utilisation/activity rates were achieved by the Labels, Desktop Publishing and Graphic Design, Other Packaging and Paper Converting, Quick Printing, Folding Cartons and General Promotional and Commercial sectors.

Over the forecast period most sectors are either expecting increased investment or no change in plant and machinery over the next six months, while the Folding Cartons and Business Forms and Continuous Stationery sectors are forecasting reduced investments.

A close examination of the latest survey outcomes clearly shows that the labour availability outcome was the worst in the history of the survey and highlights the difficulties that increasing number of companies operating in the printing and associated industries are having in keeping and attracting labour. Selling prices continue to fall as well despite expectations to the contrary. The December net balance outcome for selling price was the best net balance outcome since December quarter 2000 which gives us hope that prices may soon start to recover.  

The December quarter outcome for material costs reversed the recent moderating trend. Despite the reported deterioration, compared to the same period a year earlier material cost pressures continue to be less intense which is likely to be due to the appreciating currency.

Raw material stocks were also reported to have declined for the third consecutive quarter. Average wage outcomes continue to be significant and the December quarter saw a much higher net balance outcome.

Hagop said that the decline in business confidence was partly expected due to seasonal influences but also because of ongoing economic uncertainty. "The industry projections arising out of the latest economic survey no doubt have been influenced by a combination of seasonal factors and heightened economic uncertainty as reflected by the plunge in the stock market, rising levels of interest rates and concerns that both global economic activity and domestic activity will moderate".

"If economic activity starts to moderate than business confidence is likely to remain subdued for the remainder of 2008," he concluded.

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.