The Westpac-ACCI Actual Composite lifted to 55.1 in the fourth quarter from 49.4 in the third quarter, marking the strongest reading since mid-2024, according to a Tuesday report by Westpac.
The increase was driven primarily by an expansion in output and a lift in new orders, while employment also rose, although more modestly, but overtime usage was unchanged.
The bank said that the improvement reflects trends in official data, as there is a genuine upswing in consumer spending underway, coming off the back of an improvement in real household disposable incomes. The bank also noted some early signs of a broader pick-up in investment across the economy.
The bank added that the latest improvement still fell short of expectations. However, manufacturers remain increasingly optimistic as the Westpac-ACCI Expected Composite climbed to a post-pandemic high of 62.8 in the fourth quarter, helped by manufacturers' confidence in the current economic upswing.
The bank also noted that risks remain as inflation has picked up recently, with interest rate uncertainty.
Cost pressures have eased notably since 2022 and 2023, but they remain elevated at around double the pre-pandemic average pace, and against this backdrop, manufacturers are finding there is limited scope to pass on these costs in the form of higher prices, the report added.
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