Australian CEOs Are Expecting Only Modest Growth In Sales For 2014: Industry Survey

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A peak industry group survey of Australian CEOs shows the non-mining sector is no where near picking up the slack from the downturn in mining infratsructure investment.

The Australian Industry Group’s (Ai Group) annual Business Prospects report released today shows investment in the non-mining sectors will improve only marginally in 2014 from very low levels

Most CEOs expect general business conditions to remain weak although they see the year being modestly better across manufacturing, construction, services and mining services.

The main reason cited for weak conditions was lack of customer demand (21%) followed by wage pressures (15%), business regulation (11%) and the exchange rate (10%).

The survey found that 37% of CEOs expect business conditions to improve in 2014 but 35% expect general a deterioration.

Another 28% anticipate conditions to be unchanged.

Industry Group Chief Executive Innes Willox said :

“This year’s CEO Survey suggests that 2014 will continue to see only modest growth in production, sales and employment as the economy struggles to rebalance in the face of lower levels of investment in resource projects and lower commodity prices. While low interest rates have begun to have an impact in some sectors and while competitiveness has improved with the lower Australian dollar, we are still some way from the required rebound in the non-mining sectors of the economy. In particular, business investment in the non-mining sectors is set to improve only marginally in 2014 from very low levels.”

The survey received responses from the CEOs of 241 businesses across Australia. Together, these businesses employed around 39,400 people and had a collective annual turnover of $15 billion in 2013.

Key Findings:

  • 37% of all CEOs surveyed anticipate an improvement in business conditions in 2014, 35% expect general conditions to deteriorate this year, 28% expect conditions to be unchanged over 2014.
  • A lack of customer demand is the most common growth problem expected by CEOs in 2014, with 21% of all CEOs nominating this area as one of their top three “growth inhibitors” for the year. Wage pressures (15% of respondents), business regulation (11%) and the exchange rate (10%) are other key areas of concern. Compared to 2013, wages and inflexibilities in industrial relations have become a key concern for more businesses.
  • In terms of growth strategies for 2014, At least one-fifth of CEOs in each of the mining services, manufacturing, services and construction sectors plan to focus on improving sales for their current range of products. New products or services are planned by 28% of mining services, 20% of manufacturing and 19% of CEOs heading up services and construction businesses. A focus on building new Australian customers is included in the growth strategies for 21% of construction firms, 16% of services firms, 15% of mining services firms and 14% of manufacturers.
  • Manufacturing 40% of CEOs are expecting another year of contraction in 2014, while a third are anticipating an improvement. Around half of the respondents expect stronger sales revenue. 41% of manufacturing CEOs are planning to cut staff numbers in 2014 while 21% are looking to
    increase their headcounts. Manufacturers’ investment intentions are mixed for 2014, with 32% expecting to increase their expenditure but 31% proposing a cut. The top five growth concerns among manufacturing CEOs for 2014 are a lack of customer demand (24%); import competition (17%); the exchange rate (15%); wage pressures (11%); and the inflexibility of industrial relations arrangements (10%).
  • Mining services CEOs were the most likely of the major industry groups surveyed to expect their general business conditions to deteriorate further in 2014 (46% expect conditions to worsen). There is to be a considerable divergence among the capital investment intentions of mining services firms with 46% looking to increase expenditure but 38% planning to cut. The top five growth concerns among mining services CEOs for 2014 are: lack of customer demand (24%); wage pressures (14%); the inflexibility of industrial relations (14%); import competition (14%) and skill shortages (11%).
  • Services industry CEOs are, on average, the most upbeat about their business conditions in 2014 compared with respondents from other sectors. 44% are expecting an improvement from last year; almost three-quarters expect their sales revenue to rise in 2014. 41% of respondents are planning to hire more employees. The top five growth concerns among services industry CEOs for 2014 are: wage pressures (19%); lack of customer demand (17%); regulatory burdens (16%); skill shortages (12%) and the inflexibility of industrial relations (11%).
  • Construction CEOs generally expect conditions in their sector to improve in 2014, as early signs of an upturn in residential construction activity are emerging. 30% of construction CEOs expect a lift in business conditions and 57% anticipate higher sales revenue for their business. However, this optimism has not transpired into stronger hiring intentions, with only 14% of construction CEOs expecting to increase headcount.

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