Pace of Manufacturing Growth Slows Down in August

2 Sep 10

Uncertainty related to the federal election was among the factors dampening demand in the manufacturing sector during August. The latest Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturers Index (Australian PMI®) fell 2.7 points to 51.7 in August partly due to slower growth in new orders and production (readings above 50 indicate an expansion in activity).

Strong mining, construction and infrastructure-related activity kept construction materials, basic metals and transport equipment in positive territory in the month. Clothing & footwear also enjoyed a lift in growth, supported by the strengthening of employment prospects over recent months. Food & beverages and paper, printing & publishing sub-sectors experienced the biggest falls.

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Australian Industry Group Chief Executive, Heather Ridout, said: "The Australian PMI® recorded its eighth consecutive month of expansion, in part due to manufacturers’ links with the construction and mining sectors. Nevertheless, election uncertainty, together with intense import competition and other ongoing impacts of a strong Australian dollar, is generating headwinds for manufacturers.

"Manufacturers have enjoyed a gradual expansion since the start of the year and, although August saw a decline in the pace of growth and new orders were flat, there are indications that the pace of recovery could strengthen in the months ahead. In particular, the stronger performance of the clothing & footwear and wood products & furniture sub sectors is encouraging and suggests that consumer demand may be picking up. This is being supported by the healthy performance of the labour market over the past year," Mrs Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "The recovery in manufacturing is proving to be somewhat slower than many have expected. In August political uncertainty detracted from overall performance adding to the range of challenges confronting both the sector and the broader economy. While manufacturing is still recovering, we are not yet seeing the sort of impetus from the private sector that is needed to underwrite aggregate growth at a time of receding public sector demand," Mr Billings said.

Australian PMI® Key Findings for August:

• Uncertainty surrounding the federal election was a factor impacting on demand in the manufacturing sector during August. The seasonally adjusted Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) fell 2.7 points to 51.7 to remain in the black in August (readings above 50 indicate an expansion in activity).
• The production sub index dropped 5.8 points to 51.5.
• New orders also took a hit, with the sub index down 6.1 points to 50.6.
• The basic metals, construction materials and transport equipment sub-sectors benefitted from the strong demand from construction, mining and infrastructure projects.
• The clothing & footwear sub-sector also performed well.
• The food & beverages and paper, printing & publishing sub-sectors experienced the biggest falls in activity.
• The employment sub index rose 3.6 points to 51.3 and the wages measure expanded rapidly.

Download the full August 2010 Australian PMI®.