Manufacturing News

Manufacturing demand dampens during August

Demand ‘dampened’ in the manufacturing sector during August, which was a direct result of uncertainty related to the federal election, according to the latest Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturers Index (Australian PMI).

Though the PMI fell 2.7 points to 51.7 throughout the month, partly due to slower growth in new orders and production, the reading was still slightly above the 50-mark which indicates an expansion in activity in the manufacturing sector.

Strong mining, construction and infrastructure-related activity kept construction materials, basic metals and transport equipment in positive territory in the month, the PMI reported. The clothing and footwear manufacturing market also enjoyed a lift in growth, supported by the strengthening of employment prospects over recent months.

The food and beverages, and paper, printing and publishing sub-sectors experienced the biggest falls throughout the month.

However, according to Australian Industry Group chief executive, Heather Ridout, August signalled the eighth consecutive month of expansion, in part due to manufacturers’ links with the booming 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 said.

“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 said.

In particular, the stronger performance of the clothing and footwear and wood products and 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,” she said.

On the other hand, PricewaterhouseCoopers global head of industrial manufacturing, Graeme Billings, said the recovery in manufacturing is proving to be slower than expected. Billings also blames political uncertainty for the fall in PMI.

“In August political uncertainty detracted from overall performance adding to the range of challenges confronting both the sector and the broader economy. 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,” Billings said.

Throughout the month, manufacturing activity rose moderately in New South Wales and South Australia, marginally in Victoria, and fell in the other states. Survey respondents cited the strong Australian dollar, higher cost of raw materials and uncertainty surrounding the federal election as negative influences, among others.

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