Australian manufacturers still suffering but ‘Performance of Manufacturing Index’ shows contraction slowing

Posted by AFN Staff Writers on 5th July 2012

Manufacturing activity continued to contract in June although the rate of contraction eased according to the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®).

While the food and beverages sector recorded a decline in activity in June, it was the least significant contraction of the eight sectors that recorded decreases, and had among the strongest expansions in inventories of finished stocks. However, the food and beverages sector recorded the sharpest decline in new orders in June 2012.

The seasonally adjusted Australian PMI® was 4.8 points stronger at 47.2 in June (readings below 50 indicate a contraction in activity with the distance from 50 indicating the strength of the decrease).

The surveyed Australian-based manufacturers expressed concern about the strong Australian dollar, the start of the carbon tax and import competition.

Only four of the 12 sub-sectors recorded an expansion in June. Clothing and footwear, paper, printing and publishing, transport equipment, and machinery and equipment all reported outright increases.

Australian Industry Group Chief Executive, Innes Willox, said that the contraction afflicting manufacturing was due to the high dollar, domestic and global uncertainties, the slump in residential and commercial construction and concerns over the impacts of the carbon tax weighed on the sector.

PwC Partner – Economics and Policy, Jeremy Thorpe, said, “The competitive squeeze in manufacturing continued in June thanks to the competing pressures of falling sales prices and continued wages growth.”

Mr Thorpe commented that the further slowing of the Chinese economy had negative implications for the Australian natural resources sector.

Other key findings from the June 2012 Australian PMI®

Eight sub-sectors contracted in June – down from nine in May.

The new orders sub-index also improved – up 5.6 points to 46.2.

Wages (59.4) and input costs (61.5) continued to rise while manufacturers’ selling prices continued to decline (41.8).

Manufacturing production was 8.6 points higher at 47.5.

The full report is available here.