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Australian PMI: Manufacturing activity in Aust still very subdued

04 April, 2008

Manufacturing activity remained subdued in March with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) falling 0.2 points to 51.2 (remaining above the key 50.0 level separating expansion from contraction) following a 2.2 rise in February.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said: "Manufacturing activity is clearly being impacted by interest rate hikes, while uncertainty around the global economic outlook is a further drag.  The lagged effect of higher official and commercial interest rates and the sustained high level of the exchange rate will continue to be felt over the next few quarters.  Further action on monetary policy appears increasingly unnecessary," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said the Australian PMI® for March 2008 clearly illustrates the ongoing competitive pressures facing manufacturers into 2008.

"Cost pressures in terms of both inputs and labour costs and the sustained competitive pressures in local and overseas markets continue to weigh heavily on firms and their margins.  Productivity improvements and cost management remains the key to company profitability in the near-term," Billings said.

Australian PMI® Key Findings for March:

  • The Australian PMI® eased by 0.2 points to 51.2 in March, with performance being affected by uncertainty on the outlook for the global economy, rising input costs and higher interest rates. 
  • Production was essentially stable, while employment eased for the third consecutive month. 
  • Overall activity was supported by a modest growth in new orders (though down on the previous month) and input deliveries, while stocks also rose and exports grew solidly.
  • Input cost price growth eased, though selling prices rose more quickly than in recent months, indicating some margin improvement. 
  • Growth in wages was stable, while capacity utilisation (unadjusted) declined moderately.
  • Manufacturers cited positive effects on activity from solid orders growth in the resources sector and infrastructure spending. 
  • Consistent with past quarters, on the negative side were import competition, cost of and lack of skilled labour, the rising cost of raw materials, the high $A and Chinese competition.
  • Activity expanded in seven sectors, the same as in February. 
  • Manufacturing activity grew in all states except South Australia.

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