What could be seen as good news for the manufacturing sector in Australia, the rate of contradiction in manufacturing activity eased in August.
According to the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) manufacturing activity rose 5.0 points to 45.3 in the month (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).
The findings revealed manufacturing production and employment improved in the month, however both continue to remain in the red at 43.1 and 41.2 respectively. Three of the eleven sub-sectors expanded in August – miscellaneous manufactures (62.3); food & beverages (55.4) and wood products & furniture (54.1).
“Manufacturing conditions continue to be very challenging across the sector with the high dollar and weakness in demand in the domestic and export markets weighing on growth. There are some encouraging signs in the August Australian PMI® with the production sub-index lifting and the forward-looking new orders sub-index rising strongly. Disappointingly, employment levels fell again in August and have now been in retreat for five consecutive months,” said Australian Industry Group Chief Executive, Innes Willox.
PwC Partner – Economics and Policy, Jeremy Thorpe, said: “Manufacturing remains in a contractionary state in Australia, as it does in China, the Eurozone, the US and Japan. This poor outlook for Australian manufacturing is driven by the economic fundamentals noted in the federal government’s Manufacturing Taskforce report. Unfortunately, these are universal challenges without simple solutions,” Mr Thorpe said.
Australian PMI®: Key Findings for August:
- The latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) was 5.0 points higher at 45.3 in August (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).
- Three out of eleven sub-sectors expanded in the month – up from just one in July.
- Miscellaneous manufacturers expanded strongly (62.3).
- Basic metals and transport equipment were among the weakest performing sub-sectors.
- The new-orders sub-index increased to 49.1 – an improvement on 8.7 points and the best reading for the sub-index since February.
- Strong wages growth continued in the month.
- The strong Australian dollar, soft retail demand and rising utility costs were among the factors cited as impacting activity in August.