Weak demand pummels manufacturing

Written on the 13 May 2009

MANUFACTURING activity has fallen for the 11th consecutive month.

Producers cut inventories at the fastest rate in the index’s history in the face of a continuing drop in demand for new goods.

The seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index fell by 3.1 points to a record low of 30.1 which is well below the 50-point mark that separates expansion from contraction.

Ai Group chief executive Heather Ridout, says there was no let-up for manufacturers in April, with weakness and uncertainty continuing to characterise the sector.

"Weak demand in both domestic and global markets contributed to the ongoing contraction of the sector. However, the inventory index is at record lows, which should suggest that production levels will have to lift soon to replenish stocks," she says.

"The infrastructure roll-out and lift in housing starts have the potential to translate into new orders for local industry. However, a concerted effort to ensure that Australian-based companies are aware of the opportunities and have a fair and open access to them is important. Ai Group will be pushing this agenda.’

Graeme Billings from PricewaterhouseCoopers Industrial Manufacturing, says the latest results clearly illustrate the ongoing squeeze on manufacturers’ profitability.

"Cutting back expenditure for marginal activities forms part of the strategy for underpinning profit margins until markets recover," he says.

"However, looking beyond the downturn remains important for long-term profitability. Retaining skilled workers, building supply chains to reduce costs and innovation across processes and products remain critically important."

While manufacturing activity fell in all states, the largest falls were recorded in Western Australia and South Australia.


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