Latest News

Manufacturing decline eases again in June, bringing hope

Once again, the Australian manufacturing industry has reported contracting business for the last month, however the pace of decline has again eased, bringing hope to manufacturing and process control communities.

According to the seasonally-adjusted Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) for June, business rose by 0.9 points to 38.4, which is only 7.1 points above the lowest reading last year, which was recorded in November.

The 50.0-point PMI is the middle level that separates expansion from contraction. Manufacturing activity has now contracted for 13 months running, however both May and June 2009 saw the rate of contraction slowing.

Four of the twelve sectors (machinery & equipment; textiles; basic metal products; and fabricated metal products) reported an easing in declines, with two sectors (food & beverages and clothing & footwear) recording increases in activity in June, reflecting the boost provided by the Government’s second stimulus package and lower interest rates, according to Australian Industry Group (Ai Group).

The weakness continued in new orders while employment, deliveries and inventories all declined at a slower pace, Ai Group said.

Ai Group chief executive, Heather Ridout, said that the Government’s stimulus, the lower interest rates and strengthening confidence have benefited some sectors, including food processing and clothing and footwear which saw a return to growth in June, and four other sectors which have reported easing in declines.

“While the slowing in declines in manufacturing inventories, employment and deliveries is encouraging, the continued weakness in new orders and production raises doubts as to whether this trend will be sustained,” she said.

“There will need to be an improvement across all sectors in the months ahead, particularly automotive, transport and construction industries which reported weakness and impeded manufacturing production in June.”

PricewaterhouseCoopers global leader of industrial manufacturing, Graeme Billings, said: “The weakness in manufacturers’ markets illustrated by continued declines in new orders puts further pressure on profit margins as prices continue to fall at the same time as input prices and wages growth remain stable.

“This only re emphasises the need for firms to continue to focus on ensuring cash flow through such strategies as reducing unit costs through inventory and supply chain management and managing debtors and creditors effectively.”

Send this to a friend