Manufacturing off to soft start

Ongoing weakness in the construction sector sees manufacturing remain below the 50-point mark for the fifth month in a row

February 1, 2011

Ongoing weakness in the construction sector has seen manufacturing get off to a soft start in 2011, despite an improvement in the transport and machinery sub-sectors.

New reports out today show the Australian Industry Group-PwC Australian Performance of Manufacturing Index
was relatively unchanged at 46.7 points in January.

Although rising 0.4 points since December, it remains below the critical 50-point level for the fifth consecutive month.

Manufacturers remained cautious in the month, driving down inventories (with the inventories sub-index down 11.4 points) rather than ordering new stock.

New orders fell in seven of the 12 sub-sectors, with the most marked decreases recorded in the construction materials; paper, printing & publishing and fabricated metals industries.

In contrast, the chemicals, petroleum & coal; transport equipment; and machinery & equipment sub-sectors benefitted from strong post-Christmas orders.

Ai Group Chief Executive Heather Ridout confirms the outlook is not encouraging with the forward-looking new orders sub-index falling for the fifth month in a row in January.

"Poor performance in sectors such as the basic metals and fabricated metals relate in part to the ongoing weakness in the construction sector," Ridout says.

"However, the impact of the Queensland floods is difficult to factor in at this time but could give support to activity in these sectors down the track," she says.

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