Global opportunities ahead for manufacturers: St George report

Business Outlook research released recently by St George Bank found business owners in the manufacturing and wholesale sector are the most likely to feel they are lagging other industries in Australia’s economic recovery compared with 11 industry segments surveyed.

Manufacturing and wholesale (76 per cent) are in line with the rest of the nation (75 per cent nation) to believe recovery is underway.

But the manufacturing and wholesale sector (85 per cent) is more likely than average
to believe different sectors are recovering at different speeds. The average for businesses across all industries is 78 per cent.

Ian Sanders, Head of Corporate and Key Segments, St George Bank, says: “There is no doubt the past year has had a significant impact on businesses and the way they are operating both now and in the future.

“But the manufacturing and wholesale sector has opportunities to capitalise on the
growth of China and India as global economic conditions stabilise,” he said.

“Rising incomes, increased immigration and the resources boom have all put positive upward pressure on business, while the domestic economy is also suffering a lag effect post the stimulus boost. This is why we are seeing multiple speeds of recovery within the same economy.”

Interestingly, 40 per cent of the manufacturing and wholesale sector say their industry is
lagging other industries in the nation’s recovery, followed by the professional and business services sector (31 per cent) and the transport and storage sector (30 per cent), influenced to varying degrees by rising incomes and increased immigration.

Mr Sanders said: “What is interesting about this research is it shows that business leaders are very much aware that significant differences exist between sectors of business in Australia and that some sectors are leading others.”

In terms of forecasting revenue for the financial year ahead, businesses are considering
a relatively modest growth target often after suffering declining revenue for the past year or two.

Manufacturing and wholesale are among the most likely (66 per cent) to record a drop in profit since the GFC.

On average, businesses are forecasting revenue to lift by 8.3 per cent over the current financial year, which is below the average year-on-year long-term growth of 9 per cent. The manufacturing and wholesale sector is forecasting an average growth in revenue of 8.5 per cent.

When asked more generally about whether the 2010/11 financial year would be better or worse, the sectors most likely to be optimistic are the finance and insurance (79 per cent better), professional and business services (79 per cent better) and education, cultural and personal services (78 per cent better) industries.

Manufacturing and wholesale are more subdued with 60 per cent expecting a better 2010/11 financial year.

St George Bank
Ph: 02 9236 3536