Manufacturing activity softens once again in November

Manufacturing activity once again ‘softened’ in November, due to the ongoing impact of the strong Australian dollar, rising interest rates and skill shortages, according to the latest Australian Industry Group - PwC Australian Performance of Manufacturing Index (Australian PMI).

Manufacturing activity once again ‘softened’ in November, due to the ongoing impact of the strong Australian dollar, rising interest rates and skill shortages, according to the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI).

The Australian PMI fell 1.8 points to 47.6, with readings below 50 indicating a contraction in activity.

November’s low PMI represents four consecutive months of contraction.

Though seven of the 12 manufacturing sub-sectors expanded during the month — including textiles — this was not enough to offset the falls in the other areas, according to Australian Industry Group (Ai Group).

Worryingly, new orders across manufacturing continued to weaken in November, however this is expected in the lead-up to the Christmas shut-down period for many manufacturing sectors.

According to Ai Group chief executive, Heather Ridout, the continued softness in the Australian PMI underscores the difficult conditions confronting the industry.

“In particular the ongoing weakness in the forward-looking new orders sub-index does not suggest that an early pick-up in activity is in prospect,” she said.

“Clearly, factors including the sustained high dollar, higher interest rates and skill shortages, together with the caution around spending on the part of business and consumers, are dampening the outlook for the sector with implications for the broader economy.

“It is clear that the much talked about multi-speed economy is taking hold, posing major challenges for trade exposed sectors which in turn poses major challenges for government.

“Indeed, the number one economic and social challenge now facing the Federal Government is to manage the unfolding minerals boom in a way that does not put at risk the objective of retaining a diversified and balanced economy.”

PwC global head of industrial manufacturing, Graeme Billings, said the pressure on domestic manufacturers is intensifying and businesses are searching for further cost savings.

“This is putting an even-higher premium on value-enhancing business improvements and innovation,” he said.

“At the same time, the exploitation of opportunities for value enhancement are constrained by growing shortages of skilled labour.”

Five sub-sectors of manufacturing declined in November, with the basic metals, and machinery and equipment sub-sectors representing the most significant falls.

The new orders sub-index remained relatively stable at a level of 43.3, indicating ongoing contraction.

Employment was also down in the month.

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