Australian manufacturing companies are feeling slightly more upbeat about the future than they were a few months ago, but their optimism is significantly tempered from earlier in the year.
The trend has given a leading economist a sense that the mood among businesses is shifting, as they face a housing downturn, Australian policy uncertainty and global trade tensions.
"You can sense a sort of shift in the mood of businesses. There's been a bit of cooling of sentiment," Westpac senior economist Andrew Hanlan told reporters in Canberra on Thursday.
"It gives us a sense of growing uncertainty and mounting risk."
A quarter of manufacturing firms believe the general business situation will improve in the coming six months, according to the latest Australian Chamber of Commerce and Industry-Westpac survey.
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That's up from 22 per cent in September, but down from 37 per cent in June.
The survey's composite index, which paints a picture of strength in manufacturing, declined a little to 63.1 in December, from 66.2 in September.
But the index is still above average, as it has been since December 2016.
An upswing in the construction of buildings that aren't homes, especially through investment in public infrastructure, has contributed to manufacturing strength in the latest quarter.
The low Australian dollar has also added to competitiveness for exporters and import-competing firms, along with robust global economic growth.
Manufacturers who work in agriculture have faced some difficulties, in line with drought-affected farmers in NSW and Queensland.
An index manufacturer's expectations of new orders and employment going forward has risen slightly from 61.1 in September to 63.5 in December.
Mr Hanlan said the overall picture is good, but the economy has lost some pace which has been weighing on the minds of businesses.
"It does show it's vulnerable to any further negative shocks," he said
ACCI chief executive James Pearson said the key to turning things around is policy certainty, particularly in the lead-up to the federal election likely to be held in May.
"We need to see clear policy certainty coming from the government, the alternative government, and from the crossbenchers," he said.
Business are particularly focused at the moment on energy, skills and industrial relations policies, Mr Pearson noted.
The survey released on Thursday also includes a metric for jobs growth, which suggests employment will keep on growing in 2019.
