Australian food and beverage manufacturing in serious contraction, latest figures

Posted by AFN Staff Writers on 6th May 2013

The performance of the Australian manufacturing sector, including food and beverage manufacturing, worsened significantly in April 2013 amid weakening economic conditions, according to industry association the Australian Industry Group (AI Group).

The latest AI Group Australian Performance of Manufacturing Index (Australian PMI) recorded 36.7 in the month, down 7.7 points on March. Readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease.

Significant contractions were recorded in food, beverage and tobacco products.

“This is the lowest level the Australian PMI has recorded since May 2009 and the lowest export reading since the export sub index was added in 2004,” said Innes Willox, Chief Executive of the AI Group.

“The sharp drop in manufacturing production, employment and new orders in April, along with the continued erosion of exports, is deeply concerning. The strength of the Australian dollar is a major burden on domestic producers and our rising unit labour costs and high energy prices are adding to pressures,” Mr Willox said.

The AI Group said the competitiveness of the entire Australian manufacturing sector in both the local and export markets was being undermined, and that these factors were “proving a major barrier to inbound investment in domestic manufacturing facilities”.

“As a result, a large proportion of the manufacturing sector is now doing it very tough,” Mr Willox said.

Contractions in activity were also recorded in other manufacturing sub-sectors. Seven of the eight manufacturing sub-sectors declined in April. Printing and recorded media, non-metallic mineral products, metal products, and machinery and equipment all recorded significant contractions.

The AI Group said capacity utilisation in the manufacturing sector fell 2.4 points to 68.6 – the lowest level since June 2009 – and that exports continued to contract for the ninth consecutive month, falling to 24.5 in April 2013.

Significant contractions in manufacturing activity were recorded across most states, especially in Victoria, where the Australian PMI fell 8.4 points to 29.1 in April 2013, the lowest level on record.

Wages and input prices continued to rise strongly during April, while the decline in selling prices across the manufacturing sector persisted, indicating that profits for manufacturers continued to be squeezed.