According to Australian Industry Group‘s (AiG) latest Performance of Manufacturing Index, Australian manufacturing has dropped away 3.4 points in August, setting down to 47.3 that is below the 50 contraction/expansion line.
AiG has stated that the drop is not that severe. However, the shortcoming in new orders and the growth in only two sub-sectors (“large food, beverages and tobacco” and “smaller wood and paper products”) appears to be an unsatisfying result.
AiG CEO Innes Willox said the high Australian dollar is pulling down the business. According to respondents, it is “maintaining the intensity of import competition”.
“To date, we have not seen the surge in housing construction flow through to the manufacturing sectors traditionally linked to house building such as metal products and non-metallic mineral products,” said Willox.
Business Insider Australia has stated that the most relevant part of the survey are indications that the economy recovery has been stalled in housing, and doesn’t spread throughout the wider economic system.
“In part this appears to be due to higher levels of import competition and in part because the simultaneous reduction in engineering construction is detracting from demand in these sub-sectors,” Willox added.
According to Business Insider Australia, the Reserve Bank of Australia (RBA) board should “take this seriously and while there is a little prospect of a rare cut, this might be the time to address the issue regarding Australian dollars.”