Manufacturing activity in Australia fell for a third consecutive month in August. Tighter financial conditions have driven an easing of consumer demand and weaker housing construction, which have reduced demand for manufactures. Manufacturing is also being buffeted by weaker global growth, rising input costs and the still high Australian dollar.
The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian Purchasing Managers’ Index (PMI) rose marginally in August, by 0.1 points to 47.0, to remain below the 50-point mark separating expansion from contraction.
Production and employment fell again in August, though at a slightly slower rate than in July. New orders fell for a fourth consecutive month, putting pressure on future production. Inventories and supplier deliveries were stable. Exports fell.
Input costs grew strongly again in August while selling price growth accelerated. Wage increases eased in August but remained solid. Capacity utilization declined moderately.
Manufacturers again cited positive effects on activity from infrastructure and mining related demand. Key negatives were: a weak retail sector; soft housing construction; raw material costs and shortages, especially steel; and import competition.
Manufacturing activity grew in Western Australia and was stable in Queensland but declined in all other states.
Sectors
Seasonally adjusted, activity expanded in four sectors in August, compared to five in July. Activity fell in eight sectors.
The construction materials sector saw solid growth in August, reflecting solid mining and infrastructure related demand, following two months of significant decline. The machinery & equipment; food & beverages; and paper, printing & publishing sectors saw moderate growth.
The miscellaneous manufactures sector saw significantly lower levels of activity.
Activity was also softer in the chemicals, petroleum & coal products; textiles; clothing & footwear; wood, wood products & furniture; basic metal products; fabricated metal products; and transport equipment sectors.
Production and Capacity
Seasonally adjusted, the production sub-index rose marginally by 0.3 points to 47.4, but remained below the 50-point mark separating expansion from contraction. Unadjusted, three sectors reported higher production, while production fell in nine sectors.
Production grew solidly in the food & beverages; paper, printing & publishing; and machinery & equipment sectors.
Production fell sharply in the miscellaneous manufactures; textiles; clothing & footwear; wood, wood products & furniture; chemicals, petroleum & coal products; basic metal products; and transport equipment sectors.
Production fell more moderately in the construction materials and fabricated metal products sectors.
Capacity utilization fell moderately to 72.3 percent in August, down from 75.0 percent in July, in line with weaker overall production in the manufacturing sector.
New Orders
The seasonally adjusted new orders sub-index fell by 1.6 points to 43.2 in August, its fourth consecutive decline.
One sector reported higher new orders (unadjusted) in August compared with three in July. Two sectors reported stable new orders in August while nine sectors reported falls. Orders rose moderately in the machinery & equipment sector and remained stable in the food & beverages and paper, printing & publishing sectors.
A sharp fall in new orders was experienced in the housing exposed construction materials sector. The miscellaneous manufactures; textiles; clothing & footwear; wood, wood products & furniture; and chemicals, petroleum & coal products sectors also saw solid falls. More moderate falls were seen in the basic metal products; fabricated metal products; and transport equipment sectors.
Employment and Average Wages
Seasonally adjusted, manufacturing employment fell for the sixth consecutive month, though the decline eased slightly in August, with the sub-index rising by 0.8 points to 48.2.
In unadjusted terms, employment grew in three sectors, compared with two in July. It fell in eight sectors and remained stable in one. Employment rose in the food & beverages; paper, printing & publishing; and machinery & equipment sectors and was stable in the construction materials sector.
Consistent with poor production performance, employment fell significantly in the textiles; transport equipment; and miscellaneous manufactures sectors. Employment also fell in the clothing & footwear; wood, wood products & furniture; chemicals, petroleum & coal products; basic metal products; and fabricated metal products sectors.
Wages growth eased, with the index falling 3.4 points to 66.6.
Finished Stocks
The decline in stocks eased with the sub-index rising by 4.0 points to 49.8 (seasonally adjusted). Unadjusted, the number of sectors reporting increases was six, up from two in July. Stocks fell in five sectors and remained stable in one.
Stocks rose strongly in the textiles and chemicals, petroleum & coal products sectors while growing more moderately in the basic metal products; fabricated metal products; transport equipment; and machinery & equipment sectors.
Stocks fell most significantly in the clothing & footwear; wood, wood products & furniture; and miscellaneous manufactures sectors. Inventories fell moderately in the food & beverages and construction materials sectors. Inventories were stable in the paper, printing & publishing sector.
Deliveries, input costs, output prices
Seasonally adjusted, the supplier deliveries sub-index fell slightly by 0.3 points to 50.2. Unadjusted, five sectors saw higher deliveries and seven saw declines.
Deliveries rose solidly in the food & beverages and paper, printing & publishing sectors. The textiles; transport equipment; and machinery & equipment sectors posted modest lifts in deliveries.
The clothing & footwear; chemicals, petroleum & coal products; fabricated metal products; basic metal products; miscellaneous manufactures; construction materials; and wood, wood products & furniture sectors saw declines in supplier deliveries.
Raw material cost growth rose slightly as the index rose by 0.5 points to 81.8 (seasonally adjusted). In unadjusted terms, costs rose in all sectors.
The major cost gains were in construction materials; transport equipment; and wood, wood products & furniture.
Selling price growth accelerated across manufacturing.
