Manufacturing activity softens

THE latest industry survey shows growth in Australia’s manufacturing activity continued to slow in April, largely due to a stalling in production growth.

THE latest industry survey shows growth in Australia’s manufacturing activity continued to slow in April, largely due to a stalling in production growth.

Growth in new orders and supplier deliveries also slowed for the second consecutive month, burdened by renewed concerns over the exchange rate, interest rates and consumer spending. Correspondingly, inventory levels were again broadly unchanged.

The Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI) fell 0.7 points to 51.7* (still above the 50.0 level separating expansion from contraction).

Ai Group’s chief executive, Heather Ridout, said the upturn in manufacturing activity has been held back by continuing soft demand conditions and the sharp jump in the Australian dollar.

“While cost and consumer price pressures appear to have abated in recent months, the strength of the exchange rate is a real issue,” Ridout said.

Graeme Billings, PricewaterhouseCoopers global leader of industrial manufacturing, believes the subdued recovery in Australia’s manufacturing sector largely reflects the pressure of international competition.

“In order to compete effectively in both domestic and international markets, Australian manufacturers must continue to find new ways to innovate, to add value, to respond more quickly to changing customer requirements, and to become leaner.

“These attributes are essential for sustained growth, irrespective of the industry in question,” Billings said.

April was a mixed bag for manufacturers, with only six industry sectors reporting increases in activity, down from 10 in March, seasonally adjusted.

Growth was strongest in Transport Equipment, Wood, Wood Products & Furniture and in Machinery & Equipment. But activity dropped sharply in Food & Beverages and Textiles, following moderate growth the previous month, with declines also registered in Chemicals, Petroleum & Coal Products, Construction Material Products, Fabricated Metal Products, and Miscellaneous Manufacturing following rises the previous month.

Overall, production growth was at its weakest level since May last year, while growth in new orders and supplier deliveries slowed and inventories steadied.

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