January PMI Remains in Positive Territory

2 Feb 12

The January Ai Group/PwC Performance of Manufacturing Index (PMI) expanded by 1.4 points to 51.6.

This is the second consecutive month that the index has seen expansion, with the largest gains seen in the food and beverages sub-sector. Index readings above 50 points, indicates expansion.

Whilst the news is good for the manufacturing sector, Heather Ridout the out going chief executive officer of the Ai Group correctly points out that the result is encouraging, but the rate of expansion is still small. Heather Ridout has said, "respondents cited ongoing global economic uncertainty and strong overseas competition as factors inhibiting growth in January."

Textiles recorded the biggest decline in activity while the sub-sectors related to the construction industry also performed poorly. From the survey six of the 12 manufacturing sub-sectors posted declines in activity in January.

PriceWaterhouseCoopers (PWC) partner for Economics and Policy Jeremy Thorpe said "activity in the manufacturing sector had improved from its recent low in August 2011, but the long-term outlook for Australian manufacturers is unpredictable and this is placing further pressure on businesses."

As we have reported before, in view of the headwinds faced by the manufacturing sector it is critical that companies remain innovative. The need to tap into international suppy chains is becoming more critical to the manufacturing sector and this requires a long term, solid export plan. The Government needs to get more actively involved in supporting this large employing sector by having a longer term strategic plan, rather than the current band aid approach. Incentives to invest, for companies to remain innovative is also critical and has proven successful in other countries.