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Weak 2008 manufacturing causes stain on 2009

Manufacturing activity ended the year on a weak note, falling for a seventh consecutive month, and causing a bleak outlook for the start of 2009, according to the Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI).

The PMI registered 33.7 in December 2008, up by only one point on the previous month’s dismal performance.

Australian Industry Group (Ai Group) chief executive, Heather Ridout, said that December’s PMI suggests that the beginning of 2009 at least will pose more trouble for Australian manufacturers.

“The continued decline in new orders as consumers, the construction sector and overseas markets cut back on demand for manufactures, and the ongoing unwinding of inventories suggest that production will ease further over coming months. As a consequence employment will also continue to be under pressure,” said Ridout.

“It is to be hoped that lower interest rates and the Government’s spending package will provide some support for domestic growth.”

Ridout called the outlook for the beginning of this year “challenging”, but she also said the industry has shown “great resilience in the past” along with the capacity to take advantage of any opportunities that may arise in the fiture.

“As well, positive announcements such as recently in the car industry, will give a timely boost to confidence,” Mrs Ridout said of the announcement in December that the Rudd Government would contribute $149 million over three years to help GM Holden manufacture new small, more energy-efficient cars.

However, PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said that there are few positives coming from this month’s Australian PMI.

“While wages and input cost growth have eased, selling price growth has also weakened. This is being driven by the continued decline in new orders as domestic and international markets soften,” he said.

“Declining revenues, at a time when production is being cutback and unit costs rise, means a squeeze on profitability. Rigorous cost management, reassessment of business and investment plans with a focus on innovation and retention of skilled workers are critical to ensuring that business comes out of this downturn poised to take advantage of improving markets.”

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