Australian Manufacturing surprises with a positive shift

Posted by AFN Staff Writers on 3rd January 2012

The Australian manufacturing sector nudged positive territory in December with the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) released today, rising by 2.4 points to 50.2 (readings above 50 indicate an expansion in activity).

The strongest expansions in December 2011 were seen in the miscellaneous manufactures; basic metals; paper, printing & publishing; and transport equipment sub-sectors. However, this lift in activity was largely offset by falls across the fabricated metals; chemicals, petroleum & coal products; construction materials; and textiles sub-sectors. Production levels and supplier deliveries increased in December.  Conversely, manufacturers’ profitability continued to be squeezed as the rise in wages and input prices gained speed while selling prices continued to decline, albeit at a slower rate.

Australian Industry Group Chief Executive, Heather Ridout, said: “Manufacturing ‘mercifully’ fell across the line into positive territory in December – on the back of a pick-up in production and new orders – in what was a better end to 2011 than might have been anticipated after such a tough year. The result points to the resilience of Australian manufacturers against formidable headwinds.  However, it needs to be borne in mind that the majority of the sub-sectors recorded declines, highlighting the continuing impact the high dollar, soft domestic demand and the uncertainty in the global economy are having on the industry.  Therefore, while the tentative pick-up in manufacturing activity is encouraging, clearly the sector remains vulnerable to any renewed downturn in the global economy and to the underlying structural pressures associated with strong commodity prices,” Mrs Ridout said.

PwC Australian Head of Industrial Products, Peter Le Huray, said: “In spite of the current challenging economic conditions, pockets of strength in the Australian manufacturing industry remain. This suggests that the efficiency and productivity improvements achieved by the manufacturers are better positioning them to ride out a global economic downturn.  To maintain this momentum, it is critical that manufacturers persist with streamlining business operations and continue to find more ways to increase efficiency,” Mr Le Huray said.

Australian PMI®: Key Findings for December:

  • The manufacturing sector nudged positive territory in December with the seasonally adjusted Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) rising 2.4 points to 50.2 in December (readings above 50 indicate an expansion in activity).
  • The growth was largely attributed to expansions across the miscellaneous manufacturers, basic metals, paper, printing & publishing; and transport equipment sub-sectors.
  • The expansion in overall manufacturing activity was, however, curtailed by contractions in the fabricated metals; chemicals, petroleum & coal products; construction materials; and textiles sub-sectors.
  • Respondents cited weak domestic demand and global economic uncertainty as factors constraining growth.
  • New orders contracted at a slower rate, as the sub-index rose 1.8 points to 49.9.
  • Production levels increased, with the sub-index rising to 51.0 following significant lifts in manufacturing output in the food and beverages; clothing and footwear; wood products and furniture; paper, printing & publishing; and basic metal sub-sectors.
  • Supplier deliveries and inventories were also stronger.
  • The increase in wages and input prices gained speed, while selling prices declined at a slower pace.