Manufacturing up but recovery long way off

Manufacturing improves but the recovery is a long way off, according to Ai Group

Manufacturing up but recovery long way off
Manufacturing up but recovery long way off
November 3, 2009

Manufacturing activity in Australia grew for the third consecutive month in October despite losing some of the previous month’s gains, according to figures released by the Australian Industry Group (AIG) yesterday.

Figures from the Australian Performance of Manufacturing Index (Australian PMI) show the seasonally adjusted index remained relatively steady, down by 0.3 points to 51.7 and above the 50 point level separating expansion from contraction.

AIG says growth was driven mainly by a substantial lift in new orders and "modestly" higher production, but further falls in employment detracted from any further possible expansion.

Despite the rise, AIG Chief Executive Heather Ridout says there remains a long time to go until manufacturing is back where it was before the economic downturn.

She says the ability for manufacturing to get back into this position depends the strength of the Australian Dollar and an increase in orders for new goods.

"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," Ridout says.

"A period of sustained improvement in new orders and production will be needed to reverse the continuing fall in manufacturing employment.

"The recovery in manufacturing activity remains tentative, with exports still soft, policy stimulus easing and unemployment 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."

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