Australian Manufacturing Holds Ground But Just!

4 Jan 12

December's PMI shows improvement in Australia's manufacturing sector performance, but growth in the sector remains a hard grind.

The Ai Group, PriceWaterhouseCoopers performance of manufacturing index (PMI) rose 2.4 points to 50.2 in December, a move into positive territory with the 50 point mark seperating expansion from contraction. The result is better than anticipated by analysts given that the sector has had a difficult year in facing the headwinds of the strong Australian dollar, global economic uncertainty, asian competition, lacklustre domestic demand and a lack of government action to support the sector despite government "spin" to the contrary.

The PMI shows the strongest gains were in the miscellaneous, basic metals, paper, printing and publishing, and transport equipment sectors, whilst the index showed weakness in the fabricated metals, chemicals, petroleum and coal products, construction materials, and textiles areas.

"While the tentative pick-up in manufacturing in activity is encouraging, clearly the sector remains vulnerable to any renewed downturn in the global economy and to the underlying structural pressures associated with strong commodity prices" Ai Group CEO Heather Ridout said.

The data also indicates a continued erossion of margins in the sector with rising labour and input costs and weaker selling prices.

In the face of weak domestic demand and global uncertainty the manufacturing sector must continue to strive to be more efficient and productive with the use of innovation and technology, however as we have commented before, there is little incentive for our manufacturers to do so, with not only a lack of government support, but the lack of any investment incentive programs, such as tax concessions, that are working successfully overseas where Government's are trying to stimulate manufacturing activity.

Click Here to read the full PMI Report