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Australian PMI®: Manufacturing activity ends year on weak note

06 January, 2009

Manufacturing activity has ended the year on a weak note, falling for a seventh consecutive month. The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) registered 33.7 in December, up by an albeit modest one point on the previous month.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said: "December's Australian PMI® outcome suggests that the start of 2009 will bring with it many challenges for manufacturers, who are already experiencing extremely tough conditions.

"The continued decline in new orders as consumers, the construction sector and overseas markets cut back on demand for manufactures, and the ongoing unwinding of inventories suggest that production will ease further over coming months. As a consequence employment will also continue to be under pressure.

"It is to be hoped that lower interest rates and the Government's spending package will provide some support for domestic growth.

"The manufacturing industry, like the rest of the economy, is going to face some challenging times in 2009, however, the industry has shown great resilience in the past and the capacity to take advantage of opportunities. As well, positive announcements such as recently in the car industry, will give a timely boost to confidence," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said: "There are few positives coming from this month's Australian PMI®. While wages and input cost growth have eased, selling price growth has also weakened. This is being driven by the continued decline in new orders as domestic and international markets soften.

"Declining revenues, at a time when production is being cutback and unit costs rise, means a squeeze on profitability. Rigorous cost management, reassessment of business and investment plans with a focus on innovation and retention of skilled workers are critical to ensuring that business comes out of this downturn poised to take advantage of improving markets," Billings said.

Australian PMI® Key Findings for December:

- Manufacturing activity fell for a seventh consecutive month in December.
- The Australian PMI® recorded 33.7 in December, an increase of 1.0 point on the previous month. Capacity utilisation fell to its lowest level in sixteen years.
- All components remained below 50 points indicating falls in the levels of each indicator. New orders and unemployment fell, though at a slower rate than in November, while production, inventories and supplier deliveries fell faster than in November.
- Wages, selling price and input cost price growth eased in December, while the fall in manufactured exports slowed over the month.
- Lower official interest rates and government spending measures, global and local, have yet to have an impact on demand for manufactures.
- The ongoing fall in activity reflects slower consumer demand, the weak construction sector and the impact of falling global demand for manufactures as reflected in international PMI measures.
- Manufacturing activity fell in all states, particularly in Western Australia and Queensland.

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