Uncertainty related to the federal election among the factors dampening demand in the manufacturing sector during August
September 1, 2010
Uncertainty related to the federal election was among the factors dampening demand in the manufacturing sector during August.
The latest Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturers Index (Australian PMI) fell 2.7 points to 51.7 in August partly due to slower growth in new orders and production.
Strong mining, construction and infrastructure-related activity kept construction materials, basic metals and transport equipment in positive territory in the month.
Clothing & footwear also enjoyed a lift in growth, supported by the strengthening of employment prospects over recent months.
Food & beverages and paper, printing & publishing sub-sectors experienced the biggest falls.
Australian Industry Group Chief Executive Heather Ridout says the Australian PMI recorded its eighth consecutive month of expansion, in part due to manufacturers’ links with the construction and mining sectors.
“Nevertheless, election uncertainty, together with intense import competition and other ongoing impacts of a strong Australian dollar, is generating headwinds for manufacturers,” Ridout says.
“Manufacturers have enjoyed a gradual expansion since the start of the year and, although August saw a decline in the pace of growth and new orders were flat, there are indications that the pace of recovery could strengthen in the months ahead,” she says.
“In particular, the stronger performance of the clothing & footwear and wood products & furniture sub sectors is encouraging and suggests that consumer demand may be picking up. This is being supported by the healthy performance of the labour market over the past year.”
PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, admits the recovery in manufacturing is proving to be slower than expected.
“In August political uncertainty detracted from overall performance adding to the range of challenges confronting both the sector and the broader economy,” Billings says.
“While manufacturing is still recovering, we are not yet seeing the sort of impetus from the private sector that is needed to underwrite aggregate growth at a time of receding public sector demand,” he says.
KEY FINDINGS
Australian PMI key findings for August show the production sub index dropped 5.8 points to 51.5.
New orders also took a hit, with the sub index down 6.1 points to 50.6.
The employment sub index rose 3.6 points to 51.3 and the wages measure expanded rapidly.