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Manufacturing activity remains slow

31-08-2010
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Manufacturing activity remains slow

Despite a falling Australian dollar and record low interest rates, the manufacturing sector continues to struggle.

The Australian Industry Group's (Ai Group) Performance of Manufacturing Index (PMI) was 42.0 in July, down 7.6 points from June. Readings below 50 indicate a contraction in activity.

It was the 25th consecutive monthly contraction in manufacturing activity.

Five sub-sectors improved in July, while three worsened. Food and beverages was the only sub sector to expand.

Despite the falling Australian dollar, the exports sub-index is well below 30 points again and close to its recent record lows.  

The Australian dollar has fallen around 14 US cents since early May and currently is trading below 90 US cents.

Ai Group chief executive Innes Willox said the manufacturing sector had failed to build momentum after a promising result the previous month.

“Manufacturers are telling us that, while the fall in the Australian dollar and the May interest rate cut have been extremely welcome, they have not yet been enough to turn around a very challenging business environment, he said. “In fact, the drop in the currency has fuelled higher prices for imported inputs without any real corresponding improvement in stronger exports.”

Mr Willox said confidence among manufacturers and their customers remained relatively depressed.

“Concerns are evident about the timing of this year's federal election with related policy uncertainty in key areas, he said. “This is causing many businesses to further postpone their investment decisions.”

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