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Weak export outcome for manufacturing due to high dollar

07 November, 2007

Manufacturing activity picked up in October to record moderate growth while a soft export outcome signalled the negative impact of the high Australian dollar.

The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) for October rose 2.6 points to 53.3 (above the key 50.0 level separating expansion from contraction). The Australian PMI® result reflected better production growth while employment and new orders growth made only small gains. 

Ai Group chief executive, Heather Ridout, said: “This month’s Australian PMI® continues the trend of modest expansion in manufacturing with little sign of accelerating inflationary pressures in terms of wages or prices.

“The lack of growth in exports clearly indicates the drag of the high Aussie dollar on manufacturing. This, combined with the competitive pressures being exerted by economies such as China and the associated easing of selling price growth gives rise to challenging times for manufacturers,” Ridout said. 

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said the Australian PMI® highlights that companies are operating in a climate of moderate growth. 

“However, the pressures on manufacturers from the high exchange rate and ongoing competitive pressures in global markets mean that lifting productivity and managing costs remain paramount in maintaining market share and profitability,”  Billings said.

 Australian PMI® Key Findings for October:

The Australian PMI® rose 2.6 points in the month to 53.3 which was the 17th consecutive monthof growth.
- Activity expanded in nine of the twelve sectors, up from six in September.
Improvement in growth was reflected in most key indicators; but to varying degrees.
- Production growth contributed most while growth in employment and new orders was modest.
- Deliveries were essentially stable.
- Input cost and selling price growth both eased in October.
- Growth in wages lifted moderately, while capacity utilisation fell slightly.
- Soft export outcome as the Australian dollar hit new highs.
- While companies highlighted strong demand conditions as a positive influence, they cited the higher Australian dollar, skills shortages, weather and Chinese demand and competition as key factors contributing to challenging business conditions.
- Manufacturing performance picked up in New South Wales, Victoria, South Australia and Western Australia but slowed in Queensland and Tasmania.

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