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LOWER DOLLAR BOOSTS MANUFACTURING EXPORTS

03-02-2015
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Australian manufacturing rose in January, boosted largely by the falling Australian dollar.

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by 2.1 points to 49.0, indicating broadly stable conditions across the manufacturing sector. 

Manufacturing activity was boosted in part by a lift in manufacturing exports off the back of the lower Australian dollar (readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease).

Three of the seven activity sub-indexes were above 50 points this month.

Manufacturing exports expanded for a second month (up 3.0 points to 54.0), while supplier deliveries (up 4.3 points to 52.9) and stock levels (up 6.0 points to 51.4) returned to expansion after contracting in December 2014.

Although the new orders (up 3.9 points to 47.6) and production (up 2.7 points to 48.6) sub-indexes improved in January, they both remained below 50 points. Manufacturing sales contracted for an eighth consecutive month (down 1.1 points to 45.3).

Three of the eight manufacturing sub-sectors expanded in January.

The large food, beverages & tobacco sub-sector continued to expand (up 2.5 points to 62.9), as did the smaller textiles, clothing & furniture (up 0.7 points to 59.3) and non-metallic mineral products (up 5.9 points to 68.4) sub-sectors, which both expanded for a third consecutive month.

Ai Group Chief Executive, Innes Willox, said: “While manufacturers opened the new year with reductions in sales, production and new orders, the healthy lift in exports is a welcome sign that the fall in the value of the Australian dollar will be a fillip to the sector over coming months.”

Mr Willox said falling dollar has been a “mixed blessing” as it has increased prices for imported inputs including capital equipment.

“This adverse impact of the lower dollar, together with the loss of sales from the sharp drop in mining investment, the wind down of auto assembly in Australia and generally weak business investment indicate that the headwinds facing the sector will continue well into 2015,” Mr Willox said.

 

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