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Aust manufacturing industry activity eased during August

07 September, 2007

Australia's manufacturing activity eased in August, as growth in consumer demand and new orders unwound from recent strong highs, with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) falling 5.0 points to 52.4 (still above the key 50.0 level separating expansion from contraction).

Ai Group Chief Executive, Heather Ridout, said the easing in manufacturing activity in August was disappointing.

"Manufacturing activity has been quite robust throughout the year, despite quite strong headwinds. Going forward, activity could go either way. Impacting on activity is the high Australian dollar, an unsteady housing market, skill shortages, higher interest rates, and a fragile stock-market. If confidence is strong and demand holds out, however, we're hopeful that industry will ride it out, albeit at a potentially lower level of activity," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said stock management over the coming months will be vital.

"The Australian PMI® highlights that, as consumer demand slows, stocks have had to be lowered significantly over the last few months. Lower deliveries will help, but careful monitoring of inventories will ensure that companies are well placed to lift production when demand eventually picks up. Also, with input costs lifting in August, companies need to look for offsets in order to sustain their profit margins," Billings said.

 Australian PMI® Key Findings for August:

- The Australian PMI® fell 5.0 points in the month to 52.4. It was nevertheless the 15th consecutive month of growth for the industry.
- The softening in activity was reflected across all key indicators: production, new orders, finished stocks, deliveries and exports, although employment remained largely unchanged.
- Input costs edged higher. 
- Activity expanded in six of twelve sectors, down from eight in July. Activity was strongest in transport equipment and fabricated metal products, each recording activity of over 60.0 points, and a significant improvement on the previous month. Food & beverages and basic metal manufacturers were hardest hit by the easing in demand.
- Companies cited softer orders, an excess supply of inventories, skill shortages and the impact of the currency on exports as factors contributing to a moderation in demand and activity.
- Activity lifted in NSW and Victoria, remained steady in WA, but eased in Queensland. In contrast, activity fell in SA and Tasmania.

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