Manufacturing growth in October eases amid patchy demand

08 November, 2006

Growth in Australia's manufacturing activity slowed in October, reflecting mixed domestic demand, marginally weaker export growth and intense import competition.

The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index® (Australian PMI®) for October fell 1.6 points to 51.9.

Ai Group Chief Executive, Heather Ridout, said conditions remained weak and patchy in the manufacturing sector, despite a moderate strengthening since the middle of the year.

"Manufacturing has its nose just in front, which is good for confidence in the industry.  However, growth is unlikely to strengthen on a sustained basis without more synchronised spending across states and sectors of the economy.

"Rising interest rates are bad news for the industry and are punishing businesses which are already under huge pressure," Ridout said.

PricewaterhouseCoopers Industrial Products Leader, Graeme Billings, said while exports remain soft, the fact that there have been five consecutive months of export growth is important in offsetting continued mixed demand in other parts of manufacturing.

"The continuing moderate growth in exports is particularly pleasing, given the ongoing pressures on international competitiveness from the Australian dollar and rising costs.

"Global engagement must remain an important focus for Australian manufacturers, given the difficult domestic conditions, which requires a commitment to innovation and looking for efficiencies in all aspects of production," Billings said.

Australian PMI® Key Findings for October:

Growth in production, new orders, employment and supplier deliveries all eased in the month, partly offset by a small rise in manufacturing inventories.

Export growth moderated, while input costs rose at a slightly faster rate.

Activity was mixed across consumer, industrial and construction related sectors.

Seven of twelve sectors reported expansions in activity, down from nine in September.

Growth was strongest in the basic metals and construction materials sectors, while textiles and paper, printing & publishing also reported increases in activity.

Growth slowed in food & beverages and in the chemicals, petroleum & coal products and machinery & equipment sectors and activity fell sharply in clothing & footwear.

New South Wales and Victoria were the only two states to report growth in the month. Declines in activity in Western Australia and Tasmania followed strong growth in September. Activity fell for the second consecutive month in Queensland and South Australia.