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Manufacturing growth remains modest but currency bites

04 December, 2009

Manufacturing activity grew for the fourth consecutive month in November with the latest Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) remaining relatively steady, down 0.5 points in November to 51.2.

Ai Group chief executive, Heather Ridout, said that "November's Australian PMI suggests manufacturers remain cautious. Despite a lift in new orders in recent months, manufacturers are not convinced that conditions justify rebuilding their inventories.

"Nevertheless, a lift in production across manufacturing sectors contributed to the first rise in employment in almost two years.

"The modest growth in activity in November underlines the tentative nature of the recovery. While new orders growth remained in positive territory, the stronger pace of improvement evident in October was short-lived.

"These results suggest there remains a considerable way to go before activity recovers from the setbacks over the past eighteen months.

"The strength of the Australian dollar is proving to be an important barrier to stronger recovery, adding to the need for caution in raising interest rates," Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said that "Manufacturers' profit margins remain under severe pressure despite the modest improvement in new orders that we have seen in recent months.

"The lift in growth in wages and input costs in November, at the same time as selling prices continue to fall, will require a renewed focus on cost management and continued emphasis on lifting productivity."

Australian PMI Key Findings for November:

  • The seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian PMI fell slightly in November, down 0.5 points to 51.2, still above the 50 point mark separating expansion from contraction.
  • Manufacturing activity grew for the fourth consecutive month in November; the modest expansion reflects the sluggish growth in new orders and falls in inventories and supplier deliveries.
  • The new orders index fell significantly, down 5.8 points to 51.9.
  • The production sub-index rose 1.0 point to 54.0 in November, contributing to the first rise in employment in almost two years. The employment index rose by 9.1 points to 53.7.
  • Across manufacturing, eight out of twelve sectors experienced growth, up from six in October.
  • Clothing and footwear, construction materials, and transport equipment, were among the sectors that experienced growth but activity fell solidly in the paper, printing & publishing, and basic metal sectors.
  • The rising Australian dollar continues to constrain growth across the manufacturing sector.
Source: Australian Industry Group

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