Published 07-05-2015

PRODUCTION UP, BUT MANUFACTURING SECTOR CONTRACTS AGAIN

05-05-2015

Activity across the Australian manufacturing sector contracted for a fifth consecutive month in April, according to latest industry data.

But the good news is, the pace of contraction has eased.

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) moved up 1.8 points to 48.0 (readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease).

All seven activity sub-indexes were below 50 points in April, with declines in sales (down 1.5 points to 44.7), new orders (up 1.6 points to 47.4), production (up 2.7 points to 49.3), supplier deliveries (down 0.4 points to 47.2) and stock levels (up 2.5 points to 45.9) indicative of very weak local demand.

Manufacturing exports ended four months of expansion (down 4.3 points to 47.5), mainly due to a decline in food and beverages exports (previously the strongest sector).

The food & beverages sub-sector (down 4.1 points to 55.3) remained one of four manufacturing sub-sectors to expand in April, with non-metallic mineral products (down 2.9 points to 54.5), wood & paper products (up 5.1 points to 55.2) and printing & recorded media (up 2.8 points to 61.4) also continuing in positive territory.

“Weak local demand continues to weigh heavily on Australian manufacturing, said Ai Group Chief Executive, Innes Willox.

“While there are benefits from strong residential construction activity, low interest rates, and the weaker Australian dollar, these are being outweighed by subdued local business investment in equipment, the ongoing drop in mining construction and the progressive closure of automotive assembly.”

Mr Willox said another cut in interest rates, widely tipped this month, may help boost demand.

But budgetary measures, particularly those targeting increased investment are more likely to provide the lift the domestic economy needs.

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