Australian manufacturing reverts back to contraction at the end of 2013


The Australian manufacturing sector has ended 2013 in the red as the latest Performance of Manufacturing Index (PMI) from the Australian Industry Group (AI Group) showed a contraction in activity, recording 47.6 points in December.

Image: Free Digital Photos user renjith krishnan
Image: Free Digital Photos user renjith krishnan

The latest index remains broadly unchanged from the November result which was only 0.1 point higher.

AI Group Chief Executive Innes Willox said the December PMI is another reminder that the country should have a better plan for growth.

“This latest snapshot is yet another reminder of the urgency for Australia to put itself on a more balanced and diversified growth path.  Manufacturing and related industries have a critical part to play in this strategy,” Mr Willox said.

“2013 ended without much cheer for many Australian manufacturers with the gains recorded in September and October reversed in the closing months of the year. New orders and employment fell further behind in December casting doubt over whether the start of 2014 will usher in a more positive outlook for manufacturing activity.”

“The sector, and indeed the broader economy, remains stuck behind the eight ball and manufacturing in particular is, as yet, in no position to assume a role in generating alternative sources of growth as the mining boom fades. Notwithstanding that interest rates are at low levels and that the Australian dollar appears to be on its way back down to more realistic levels, conditions in the sector remain very tough.”

While the activity indexes remained below 50 in December, several sub-sectors have continued to show improvement.

The food, beverages and tobacco sub-sector has been expanding continuously, ending at a three month moving average of 55.8 points. The expansion in FBT in December has been mostly in the production, new orders and supplier deliveries.

The wood and paper products sub-sector, although comparatively small, also expanded in the month with a reading of 73.1 (3-month MMA). The sector is currently experiencing an influx of orders of wood products associated with the building industry as housing construction picks up across Australia.

Production levels in the manufacturing industry also improved to 48.6, while wages grew at a slower pace (54.8).

Meanwhile, manufacturing exports remain very low with a December reading of 30.1.