Manufacturing confidence up four points

The first quarter manufacturing survey was conducted between 29 January and 2 April this year‚ and reflects the perceptions and expectations of 242 respondents‚ representing 19 sub-sectors of manufacturing. The results reflect trends and not absolute magnitudes.

The BER noted that while manufacturing business confidence increased in the first quarter, itt remained below the 47 points reached in the first quarter of last year.

Improved export performance was the main positive feature of the survey‚ as both the indicators for sales and order volumes showed significant increases.

The outlook is also more optimistic‚ with a net majority expecting an increase in the volume of goods exported in 12 months' time.

Domestic demand indicators retreated from the strong readings seen in the fourth quarter of last year‚ but remained in positive territory.

Production volume growth remained virtually unchanged from the fourth quarter. Better than expected demand‚ without an acceleration in production volume growth‚ caused the indicator of final goods stock levels (in relation to expected demand) to fall to a five-year low.

Labour, raw material costs rise

Input cost pressures accelerated‚ with manufacturers reporting higher labour and raw material costs.

"The higher raw material cost could have been caused by the weaker exchange rate increasing the cost of imported goods‚" BER economist Lisette IJssel de Schepper said.

Manufacturers were able to defend their profitability by increasing selling prices‚ with not only export but also domestic prices rising at a fast pace.

The net majority reporting higher levels of fixed investment (compared with the same quarter a year ago) rose for the first time in a year.

Furthermore‚ manufacturers now expect an increase in total fixed investment in 12 months' time.

"Despite the improvement in business confidence‚ manufacturers made a significant downward adjustment to expectations regarding business conditions in 12 months' time‚" IJssel de Schepper said.

"Manufacturers have not been this pessimistic about the future since the first quarter of 2009‚" she said.

These dismal readings highlighted the uncertainty manufacturers were facing‚ the BER said.

The last time these indicators were at such low levels the local economy was in the midst of a recession.

The political climate has now also started to affect expected investment outlays‚ as the percentage of manufacturers seeing the general political climate as constraining their ability to invest over 12 months' time increased significantly.

The index shot up 13 index points to 72‚ its highest level since the first quarter of 1994.