Mixed bag: retail sales up, but manufacturing slows

Crippled economy delivers mixed news to transport: handouts boost retail sales but manufacturing still falling

The crippled national economy has delivered mixed news to transport and logistics providers: while government handouts have boosted retail sales in May, manufacturing activity continues to fall.

The Australian National Retailers Association (ANRA) reports the retail sector has grown by close to 4 percent since the Federal Government introduced its first stimulus package, with another 1 percent rise in May.

The May figure is higher than the previous month, which delivered 0.3 percent grow, but less the 2.2 percent increase seen in March.

Retailers say cash handouts pumped $758 million into the retail sector in May, bringing the stimulus impact of the two rounds of handouts to $3.6 billion.

"Without the stimulus packages, the retail sector would be in a much poorer state," ANRA CEO Margy Osmond says.

All states experienced growth, except for Tasmania. Western Australia was the leader, growing 3.5 percent, Victoria is up 0.7 percent, Queensland up 1.5 percent while South Australia gained 1.8 percent. New South Wales and the Northern Territory are relatively unchanged.

Department stores grew 5.5 percent, and clothing and soft good retailing was up 2.9 percent. Continued lacklustre demand for household goods saw sales fall 2.0 percent.

Meanwhile, the Australian Industry Group says manufacturing activity continued to weaken in June, although the pace of decline eased slightly.

The Australian Performance of Manufacturing Index rose by 0.9 points to 38.4, remaining below the 50.0 level separating expansion from contraction. While activity has now contracted for 13 consecutive months, the June figure was 7.1 points above last year’s lowest reading in November.

Four of the 12 sectors (machinery and equipment; textiles; basic metal products; fabricated metal products) reported an easing in declines, with two sectors (food and beverages; clothing and footwear) recording increases in activity in June, reflecting a boost from the stimulus package.

The weakness continued in new orders while employment, deliveries and inventories all declined at a slower pace.

AiGroup Chief Executive Heather Ridout says stimulus money helped some sectors like food processing and clothing and footwear. But there's little good news in other areas.

"While the slowing in declines in manufacturing inventories, employment and deliveries is encouraging, the continued weakness in new orders and production raises doubts as to whether this trend will be sustained," she says.

"There will need to be an improvement across all sectors in the months ahead, particularly automotive, transport and construction industries which reported weakness and impeded manufacturing production in June."

PricewaterhouseCoopers Global Leader of Industrial Manufacturing Graeme Billings says the weakness puts further pressure on profit margins. Prices continue to fall at the same time input prices and wages growth remain stable, he says.

"This only re-emphasises the need for firms to continue to focus on ensuring cash flow through such strategies as reducing unit costs through inventory and supply chain management and managing debtors and creditors effectively," he says.

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