Manufacturing contraction lightens in June

The rate of manufacturing deflation eased in June, with four sectors experiencing growth, according to official statistics.

The latest Australian Industry Group (Ai Group) – PwC Australian Performance of Manufacturing Index (Australian PMI) showed growth in the clothing and footwear; paper, printing and publishing; transport equipment; and machinery and equipment sectors during June.

Manufacturing experienced loss across the board however, at 47.2 PMI points – which is below the 50-point level separating expansion from contraction.

This is up 4.8 PMI points from May however, which recorded the lowest PMI figure in nine months.

According to Ai Group, manufacturers expressed concern about the strong Australian dollar, the start of the carbon tax and import competition – all of which have been culprits for hesitation in the industry since last year.

Ai Group chief executive, Innes Willox, said the June figures represented the fourth consecutive month of manufacturing contraction.

“The contraction afflicting manufacturing extended into its fourth month in June as the high dollar, domestic and global uncertainties, the slump in residential and commercial construction and concerns over the impacts of the carbon tax weighed on the sector,” he said.

“As evidence of the waves of structural and cyclical pressures confronting manufacturers, the Australian PMI recorded expansions in only three months during the 2011-12 financial year.

“On a more positive note, the production, new orders and employment sub-indexes all lifted in June, providing hope for an expansion down the track."

PwC partner – economics and policy, Jeremy Thorpe, said the industry in China would affect Australian manufacturing going forward.

“The fall in the Chinese PMI is concerning if this indicates a further slowing of the Chinese economy, with negative implications for the Australian natural resources sector,” he said.

Among the PMI findings was an improvement in new orders, 5.6 points to 46.2.

Wages and input costs continued to rise to 59.4 and 61.5 respectively, while manufacturers’ selling prices continued to decline to 41.8, according to the report.

The amount of goods being produced in Australia in June was up 8.6 points to 47.5.