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Manufacturing activity contracts again

31-08-2010
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Manufacturing activity contracts again

Innes Willox … ‘tough going’

Australia's manufacturing sector has contracted for an eighth consecutive month following continuing falls in selling prices and new orders.

The latest Australian Industry Group performance of manufacturing index (PMI), recorded 45.2 in October – a rise of 1.1 over the previous month.

Readings below 50 indicate a contraction in activity, with the distance from 50 showing the strength of the decrease.

The new orders sub-index dropped a further 0.4 points to 43.9 in October while the only sub-sectors to expand in the month were paper, printing & publishing (51.1) and transport equipment (52.5).

Manufacturers cited the high Australian dollar, stronger import competition and rising energy prices as factors inhibiting growth in October. 

Australian Industry Group Chief Executive, Innes Willox, said: "Manufacturers continue to find the going very tough in the face of the strong dollar, weaker demand in export markets and flat conditions across the non-mining sectors of the domestic economy –particularly in commercial and residential construction which has strong linkages with domestic manufacturing.

"For quite some time, the sector has faced a squeeze on margins with prices for non-labour inputs and wages rising steadily while selling prices have been weak. 

“In October the squeeze intensified with the selling price sub-index recording its lowest level since being introduced into the Australian PMI over a decade ago.  Non-labour input prices and wages paid by manufacturers continued to rise in October although the pace of wages growth eased somewhat in the month.”

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