Manufacturing recession deepens

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The PMI is out today and confirms that the manufacturing recession that has been running for a year is deepening. The Australian Industry Group (AIG) describes conditions thus:

Conditions in the manufacturing sector deteriorated further in August with the seasonally adjusted Australian Industry Group-PwC Australian PMI® down a slight 0.1 points to 43.3.

It remains well below the 50-point level indicating a further contraction in activity.

  • The decline in manufacturing activity was especially pronounced in the paper, printing and publishing; textiles; miscellaneous manufactures; and fabricated metals sub-sectors.
  • Most survey respondents remained cautious about the outlook for the manufacturing sector citing reduced domestic demand, the strong Australian dollar, increased overseas competition, high interest rates, uncertainty surrounding proposed carbon pricing and renewed weakness in the global economy as factors weighing on the sector.
  • Wages and input costs continued to rise in August, while the decline in selling prices persisted, suggesting that manufacturing profit margins continued to narrow.
  • Manufacturing activity remained weak across most states.

So, one wonders where we go from here. Manufacturing is getting slaughtered. Canberra policy makers are cheering it on. The AIG seems to be doing its best under the leadership of Heather Ridout to bring the issue to the attention of the public and government. And there’s no doubt she’s a great media performer with coverage of manufacturing issues now gaining some media support. However, there is a great deal of difference between profile and pressure.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.