by Chris Becker
A falling Aussie dollar still cannot arrest the slow death of Australian manufacturing – this just in from AIG:
The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell by 3.2 points to 46.9 in December, indicating another contraction in conditions across the manufacturing sector (readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease).
Alarmingly, new orders fell the most as did manufacturing production with the only highlights being an expansion in food/beverages/tobacco (lovely…). The pundits expected a better print leading up to Christmas of course, but that hasn’t eventuated.
More from AIG Chief Executive, Innes Willox (emphasis added):
We would have hoped to have seen a stronger Australian PMI® in the lead-up to Christmas, but the finding is consistent with other publicly released data. Respondents to the Australian PMI® welcomed the further depreciation in the Australian dollar, but noted that the level of the dollar continues to encourage strong import competition. Business sentiment and appetite for investment remain weak.
The closure of Australian automotive assembly facilities now under way, plus the rapid decline in mining investment activity, are also weighing heavily on demand for locally made machinery inputs and components.
Key findings below:
- The Australian PMI® fell 3.2 points to 46.9 in December, indicating a contraction in conditions across the manufacturing sector this month.
- Four of the eight manufacturing sub-sectors expanded in December: food, beverages and tobacco (up 1.3 points to 60.4); wood & paper products (down 10.5 points to 51.1); textiles, clothing & furniture (up 4.2 points to 58.6); and non-metallic mineral products (up 12.4 points to 62.6), which mainly produces building materials and has benefitted from the recent improvement in residential building activity.
- The machinery and equipment (down 1.7 points to 42.9); petroleum, coal, chemicals & rubber products (up 3.0 points to 42.9); printing and recorded media (down 2.6 points to 40.1) and metal products (down 2.3 points to 40.9) sub-sectors all continued to contract this month.
- Two of the seven activity sub-indexes – employment (up 4.7 points to 52.5) and exports (up 2.9 points to 51.0) – were above 50 points in December, but the new orders (down 10.6 points to 43.7), stocks (unchanged at 45.4), and supplier deliveries (down 3.5 points to 48.5) sub-indexes all contracted.
- In the face of rising input costs (steady at 70.3 points), selling prices contracted at a faster speed in December (down 3.9 points to 45.1) and continue to place significant pressure on manufacturers’ margins. The wages sub-index was almost unchanged at 53.7 points.