Australian manufacturing has had a soft start to the New Year, according to the Australian Industry Group-PwC Australian Performance of Manufacturing Index (Australian PMI).
The index for January was relatively unchanged at 46.7 points, up 0.4 points and remaining below the critical 50-point level for the fifth consecutive month (readings below 50 indicate a contraction in activity).
Manufacturers remained cautious in the month, driving down inventories (with the inventories sub-index down 11.4 points) rather than ordering new stock. New orders fell in seven of the 12 sub-sectors.
Falls were most marked in the construction materials, paper, printing and publishing and fabricated metals sub-sectors.
In contrast, the chemicals, petroleum and coal, transport equipment and machinery and equipment sub-sectors benefitted from strong post-Christmas orders.
Australian Industry Group Chief Executive, Heather Ridout, said: "The continuing subdued performance of the manufacturing sector reflects the complex nature of the Australian economy. Consumers and businesses are cautious and there is a structural squeeze on the sector arising from the resources boom and related strength of the dollar.
“The immediate outlook is not encouraging with the forward-looking new orders sub-index falling for the fifth month in a row in January.
"Poor performance in sectors such as the basic metals and fabricated metals relate in part to the ongoing weakness in the construction sector. However, the impact of the Qld floods is difficult to factor in at this time but could give support to activity in these sectors down the track," Ms Ridout said.
PwC Global Head of Industrial Manufacturing, Graeme Billings, said: "While some encouragement can be taken from the bottoming-out of the decline in production and a slow-down in the pace of employment decline, not too much should be read into these results at this stage as they may be related simply to adjustments to stock levels following a period of falling production. In general, the indications are that the flatness of the manufacturing sector has some way to run," Mr Billings said.