Latest News

Australian PMI at record low, new orders hit hard

Manufacturing activity has dropped rapidly as new orders fall and firms run-down stock, creating the lowers Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) since its inception in 1992, according to the report released today.

The February Australian PMI fall in manufacturing activity was the ninth successive monthly fall and took the index to a record low. The Australian PMI registered 31.7 in February, a fall of 4.9 points on the previous month and remaining well below the 50-points level separating expansion from contraction.

The fall in activity is very broad-based with falls in 10 of the 12 manufacturing sub-sectors.

The textiles; paper, printing & publishing; and fabricated metal products sectors recorded the largest falls in activity in February.

Solid falls in activity were also reported in the transport equipment; basic metal products; food & beverages; construction materials; and machinery & equipment sectors in February.

Activity declined more slowly, though still significantly, in the wood, wood products & furniture; chemicals, petroleum & coal products; and miscellaneous manufactures sectors.

Australian Industry Group (Ai Group) chief executive, Heather Ridout said that the February Australian PMI illustrates that the global downturn is “intruding more forcefully into the domestic economy.”

For manufacturing in particular, the impacts of the global crisis are now compounding the difficulties associated with the structural changes that have been underway in the sector in recent years, Ridout said.

The manufacturing employment sub index of the Australian PMI recorded a disturbingly low level of 32.8, which was a particularly sharp fall of almost 10 points in February.

The manufacturing sub index has recorded an uninterrupted run of falling employment in each month over the past year. Like manufacturing activity, the fall in employment is also very broad-based. No sub sector recorded a rise in employment in February.

“Notwithstanding the favourable impacts of the December cash bonuses and successive falls in official interest rates as yet there are very few signs of any rebound in activity, indeed the industry is weakening,” said Ridout.

“The Australian PMI new orders sub index recorded a fall in new orders for a 10th successive month. The sub index fell by 3.7 points to a very low level of 28.1 in February. This is in part reflecting the run down in stocks, a phenomenon occurring worldwide in manufacturing. Once this process has unwound it’s hoped we’ll see some pick up in demand,” Ridout said.

“The growing impact of the global crisis is now being felt acutely by the manufacturing sector. Demand for exports has fallen and domestic, business and consumer confidence is very fragile. Many businesses are reporting difficulty in accessing the finance required not only for investment but also for working capital. These are ingredients that could fuel an escalation of the downturn.”

Ridout says the importance of the Government’s stimulus package will be felt here.

“We expect the further cash bonuses, the investment allowance and the roll out of schools, housing and home insulation programs will be vital for both the manufacturing sector and the broader economy over coming months.”

Send this to a friend