Manufacturing subdued despite lift in orders

Australia's manufacturing activity grew marginally over October thanks to a substantial lift in new orders

November 3, 2009

Australia’s manufacturing activity grew for the third consecutive month in October thanks to a substantial lift in new orders and modestly higher production.

The latest Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI) was down by 0.3 points to 51.7, yet remained above the 50 point level separating expansion from contraction.

According to the PMI, six out of 12 sectors reported growth, down from seven sectors in September.

Growth was particularly strong among the textiles, construction material and transport equipment sectors.

At the other end of the spectrum, activity fell in food and beverages, paper, printing and publishing following rises in recent months.

According to Ai Group Chief Executive Heather Ridout, growth inhibitors include soft exports, easing policy stimulus and unemployment, which is expected to temper consumer demand.

"The high exchange rate is adding to the pressures on manufacturers who export or compete with imports and will ease pressure on prices. In this regard, the high dollar is reducing the need for a significant tightening of monetary policy," Ridout says.

"While the lift in manufacturing activity over the past three months and rising new orders in particular are welcome, growth is not accelerating and there remains a considerable way to go before we recover the ground lost over the past year. A period of sustained improvement in new orders and production will be needed to reverse the continuing fall in manufacturing employment," she says.

Other key statistics from the October PMI include a fall in employment, with the sub-index down 5.1 points to 44.6.

Average wages growth eased in October with the index registering a drop of 3.1 points to 53.9.

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