Manufacturing decline eases in October

Australian manufacturing decline eased in October, according to the latest Australian PMI.

The latest seasonally adjusted Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI) contracted in October, albeit at a slower rate than recent months, rising 5.1 points to 47.4. 

The decline was particularly pronounced across the clothing and footwear sub-sector and sub-sectors linked to the construction industry.

Manufacturers cited a combination of slowing sales, the strong Australian dollar, cheap imports and weak housing and commercial construction as affecting activity.  Skills shortages were also cited as a barrier to growth.

Australian Industry Group Chief Executive, Heather Ridout said that while it is encouraging that the pace of the decline in manufacturing activity eased in October, the sector remained in negative territory. 

“New orders remained soft suggesting that there are no real signs of a substantial, near term pick up in the sector," Ridout said.

PwC Australian Head of Industrial Products, Graeme Billings agrees. "The easing in the contraction in manufacturing activity in October is encouraging, but the sector continues to face challenging business conditions,” Billings said.

“Manufacturers need to continue to invest in productivity in order to lift competitiveness, a key determinant for the long term outlook for the sector.”

 Key PMI findings for October:

  • Australian PMI contracted in October, albeit at a slower rate, lifting 5.1 points to 47.4 (readings below 50 indicate a contraction in activity).
  • The decline was mostly attributed to a slowing of sales, the strong Australian dollar, cheap imports and weakness in the construction industry.
  • Those sub-sectors linked to construction, including wood products & furniture, fabricated metals and construction materials all fell in October.
  • Weakening business confidence and slowing demand were behind the substantial drop in activity in the clothing & footwear sub-sector – down to 30.0 in October.
  • The new orders sub-index was 46.9 in October – up 2.3 points on the previous month although still in negative territory.
  • After 11 months of decline, employment in the manufacturing sector lifted in October to 51.6 –increases were recorded in several sub-sectors linked to mining, including chemicals, petroleum and coal products and machinery and equipment.
  • Input prices continue to rise – up 4.0 points to 68.1.
  • South Australia and Queensland were the only states to record expansions in manufacturing in October.