Manufacturing conditions remain tough in September


Manufacturers experienced another tough month in September with Australian Performance of Manufacturing Index down 1 point to 42.3

October 3, 2011

Manufacturers experienced another tough month in September with the Australian Industry Group-PwC Australian Performance of Manufacturing Index (PMI) down 1 point to 42.3, indicating a further weakening in the sector.

Ten out of the 12 manufacturing sub-sectors recorded declines in activity in September. The sub-sectors experiencing the deepest declines in activity were food and beverages; wood products and furniture; transport equipment; and miscellaneous manufactures; while the clothing and footwear and basic metals sub-sectors recorded expansions during the month.

Making matters worse, wages and input costs continued to rise in September, while the decline in selling prices persisted, suggesting that manufacturing profit margins continued to narrow.

Most survey respondents remained cautious about the outlook for the manufacturing sector citing reduced domestic demand, the strong Australian dollar, increased overseas competition and uncertainty surrounding proposed carbon pricing as factors weighing on the sector.

Australian Industry Group CEO Heather Ridout says: "Caution continues to be the order of the day with most respondents uncertain about the outlook and citing little visibility in relation to business conditions beyond the short term.

"The usual suspects of weak domestic demand, the strong Australian dollar, increased overseas competition and uncertainty surrounding proposed carbon pricing, continue to weigh on the sector.

"The Federal Government has two important meetings this week in the Tax Forum and Jobs Forum. The further decline in the manufacturing sector recorded by the Australian PMI is further evidence that the Tax Forum’s focus on the pressures of the two-speed economy is appropriate.

"Further, the fact that the Australian PMI is suggesting 11 consecutive months of job losses heightens the importance of focusing on the pressures on manufacturing jobs at the Jobs Forum."

PwC Australian Head of Industrial Products, Graeme Billings, says: "Manufacturers continue to battle very tough business conditions. Businesses are intent on further efficiency improvements, innovation and trialling new products, services and markets.

"Key ingredients for success in the current environment are striving for excellence, relentless marketing and keeping close to customers."

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