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Growth in manufacturing activity continued to ease in Sept

03 October, 2007

Manufacturing activity eased again in September as employment fell and stock levels declined, with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) falling 1.7 points to 50.7 (still above the key 50.0 level separating expansion from contraction).

The easing in growth was reflected in most key indicators including production, employment, finished stocks and deliveries.

Ai Group Chief Executive, Heather Ridout, said: "It was a very ordinary Australian PMI® result for the month made even more ordinary by the softness in new orders and exports.

"On a cautionary note, selling prices are restrained but are trending upwards, albeit moderately. This trend comes on the back of steep rises in raw material costs partly driven by the drought and higher oil prices," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said that inventory and cost management will remain crucial over the near-term.

“Companies are facing ongoing demand and cost pressures. Softer consumer demand both domestically and overseas make inventory and deliveries management vital and there are signs in the survey that companies are adjusting, enabling a smooth pick-up in production when conditions improve.  Further increases in input costs are putting a premium on cost management to maintain profit margins,” Billings said.

Australian PMI® Key Findings for September:

The Australian PMI® fell 1.7 points in the month to 50.7. It was nevertheless the 16th consecutive month of growth for the industry.
- The easing in growth was reflected in most key indicators: production, employment, finished stocks and deliveries.
- New orders remained soft.
- Food and beverages; paper, printing and publishing and chemical, coal and petroleum firms drove the easing in manufacturing overall.
- Input costs and selling prices strengthened in September and growth in wages eased.
- Exports remained stable.
- Activity expanded in six of twelve sectors, as in August. Activity was strongest in clothing and footwear; wood, wood products and furniture and basic metals.
- Companies cited the higher Australian dollar, skills shortages, weather and Chinese demand and competition as factors influencing economic conditions.
- Growth slowed in NSW and WA, strengthened in QLD and TAS but activity fell in Victoria and SA.

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