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Manufacturing activity still sluggish

15-02-2010
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Manufacturing activity still sluggish

Australian manufacturing was buoyed by improvements in production levels and new orders last month, but remains in negative territory.

The latest Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) showed an easing in the rate of contraction. 

The seasonally adjusted index firmed by 1.9 points to 48.6 (readings below 50 indicate a contraction in activity).

Despite some encouraging signs with production up (51.5) and new orders steady (50), manufacturing employment (47.4), stocks (45.5) and supplier deliveries (44.9) remained in negative territory. 

Export markets are still particularly tough for manufacturers with the sub-index falling below 30 points. A recent pickup in residential and commercial construction continues to support the non-metallic mineral products sub-sector, which rose 7.3 points to 64.8.  

"While an easing in the pace of contraction and the lift in production in February are welcome, overall conditions in manufacturing continue to reflect the intense pressures from the strong dollar, high energy costs and the legacy of a long period of low productivity growth, said Australian Industry Group Chief Executive, Innes Willox. 

“Manufacturers’ margins remain under considerable pressure and export sales are very weak. Yet it is critical that manufacturing builds competitiveness and productivity if the economy is to find new sources of growth as the boom in mining investment wanes.” 

Mr Willox said major efforts are now needed both by businesses and governments to lift the pace of innovation, to build business capabilities and to lift workforce skills in manufacturing.

“It is critical that we rebuild and recapitalise the sector and position it to take advantage of new opportunities and to assist in the task of rebalancing the economy which has become over-exposed to the fortunes of the mining sector." 

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