MANUFACTURING activity fell for a fifth successive month in October, dropping 6.8 points to 40.4, representing the lowest recorded level since the Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) began in 1992.
According to Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, October’s result reflects a combination of the uncertainties, loss of business and consumer confidence associated with the worsening global financial crisis.
“The volatility in global financial markets is having an unambiguous impact on Australian manufacturing, through slower economic growth both domestically and in its major overseas markets.
“The ongoing decline in production reflects the continuing decline in new orders which has meant a historic low for the new orders component of the Australian PMI® in October. “
Ridout went on to suggest that the slump in new orders indicates that there is a ‘crisis of confidence’ in the sector and until this is resolved it will be difficult to ascertain if the downturn in new orders is real, or s symptom of extreme caution.
“While there have been big shifts in fiscal and monetary policies, more will potentially need to be done. In particular, there is clearly room for further reductions in interest rates,” she said.
PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said the short-term outlook for manufacturing remains bleak.
“Profitability will remain under pressure over coming quarters as sales and production volumes decline and costs, though now showing signs of easing growth, continue to rise.
“In this climate, business needs to continue to reassess operations to maximise cost savings and tailor their near-term business plans effectively.
“This can be achieved through an ongoing focus on broadening of market including export markets and product scope, continued development of global supply chains and improvement of skills bases.
“Innovation as well as and including business simplification in these times will prove critical for the long term viability of the Australian manufacturing industry,” Billings said.
