Strong dollar sees manufacturing soften


Latest Performance of Manufacturing Index falls 1.8 points to 47.6 in November

December 1, 2010

Ongoing impact of the strong Australian dollar, rising interest rates and skill shortages saw manufacturing activity soften last month.

The latest Australian Industry Group - PwC Australian Performance of Manufacturing Index fell 1.8 points to 47.6 in November.

The expansion of seven of the 12 manufacturing sub-sectors in the month, including in textiles, was not enough to offset the falls in the other areas.

New orders across manufacturing continued to weaken in November.

Ai Group Chief Executive, Heather Ridout, says the continued softness in the Australian PMI underscores the difficult conditions confronting the industry.

"In particular the ongoing weakness in the forward-looking new orders sub-index does not suggest that an early pick-up in activity is in prospect," Ridout says.

She says factors such as the sustained high dollar, higher interest rates and skill shortages, together with the caution around spending on the part of business and consumers, are dampening the outlook for the sector with implications for the broader economy.

"It is clear that the much talked about multi-speed economy is taking hold, posing major challenges for trade exposed sectors which in turn poses major challenges for government," Ridout says.

"Indeed, the number one economic and social challenge now facing the Federal Government is to manage the unfolding minerals boom in a way that does not put at risk the objective of retaining a diversified and balanced economy," she says.

NOVEMBER KEY FINDINGS
According to the Index, five sub-sectors declined in the month - the most significant falls were in the basic metals and machinery & equipment sub-sectors.

A rise in new orders was largely behind the strong result in the paper, printing & publishing sub-sector.

This increase, together with the positive contributions from other sub-sectors experiencing growth in the month, was not enough to lift the manufacturing sector into the black in November.

The new orders sub-index remained relatively stable at a level of 43.3, indicating ongoing contraction.

Employment was also down in the month.



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