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Moderate but mixed manufacturing growth continues in Sept

04 October, 2006

Australia's manufacturing sector continued to grow moderately in September, with The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index® (Australian PMI®) rising a further 1.4 points to 53.5.

The slight strengthening in activity was largely attributable to a further pick-up in production growth and an accompanying increase in employment.

Activity expanded in eight of twelve sectors, up from seven in August. Industrial-based sectors again performed well, while results were mixed in the consumer and construction-related sectors.

Fabricated metals recorded the strongest expansion in activity in September, while growth also improved in machinery & equipment and transport equipment. Growth strengthened in food & beverages and wood, wood products & furniture, but eased in clothing & footwear. Activity declined in paper, printing & publishing and fell in basic metal products, for the third consecutive month.

Results across the states were mixed. Growth strengthened markedly in New South Wales, Western Australia and Tasmania, while Victoria reported its first increase in activity in three months. Meanwhile, activity declined in Queensland and South Australia.

Ai Group Chief Executive, Heather Ridout, said the September result consolidates a pick-up in manufacturing activity that has been apparent in recent months.

"This is an encouraging result for the industry. Consumers, however, are still nervous, which is being reflected in weaker results in those sectors dependent on consumer spending. It is clear that any further pick-up in manufacturing activity will depend upon the future course of housing and interest rates. Also, the lift in employment is against trend and whether it will be sustained remains to be seen," Ridout said.

PricewaterhouseCoopers Industrial Products Leader, Graeme Billings, said the return of moderate demand growth, easing cost pressures and lean inventories had helped underpin more stable conditions in the industry.

"While the improvement in activity is welcome, the sector remains under intense structural and competitive pressure, which requires manufacturers to retain a strong focus on innovation, skill development and cost control," Billings said.

Australian PMI® Key Findings in September:

The Australian PMI® rose 1.4 points to 53.5.
- A further pick-up in production growth, and an accompanying increase in employment, underpinned the slight strengthening in activity.
- New orders grew at a steady rate, while growth in supplier deliveries slowed and inventories fell for the third consecutive month. Export growth and raw material cost increases moderated.
- Activity continued to expand across industrial-based sectors, but remained mixed in both consumer and construction-related sectors.
- Growth strengthened in NSW, Western Australia, Tasmania and Victoria, and declined in Queensland and South Australia, following moderate increases in August.
- Activity expanded among businesses of all sizes, but was strongest among medium-sized manufacturers.

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