NAB Q2 manufacturing report falls

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Find below the Q2 NAB Manufacturing Index. Here’s the summary:

NAB’s Manufacturing Activity Index recorded further declines in the June quarter, down to -0.6 points (from -0.4 points in March). This implies further declines in manufacturing activity for this period – around -0.8% qoq.
• ABS data for Industry Gross Value Added has recently been revised – which has significantly downgraded the industry growth of Manufacturing over the past two years. The revised series displays trends in industry growth which match far more closely to the Manufacturing Activity Index than in previous quarters.
• Declines in the Activity Index were driven largely by declines in both Business Confidence and Final prices growth. Business confidence declined from around -3 points in Q1 to -5 points in Q2, a trend that was broadly in line with those of the broader economy. The largest declines in confidence were recorded in the Metal Products, Machinery & Equipment and Chemicals sectors.
• Growth in final prices, a lagged measure in our index, softened in late 2011, following a sharp plunge in Q3. Prices for Manufacturers declined by -0.1%, compared with growth of around +0.2% for the broader economy. Printing, TCF and Chemicals saw the largest declines in growth (with each of these sectors reporting actual declines in prices).
• The other components in the Activity Index – growth in Purchase costs and Labour costs – were relatively stable in our latest index.
• Trends for individual manufacturing sub-sectors remain divergent. The Activity Indices for Food Products, Wood Products and TCF all gained in Q2, but the plunge in the index for Metal Products, combined with declines in Machinery & Equipment and Chemicals pushed the MAI lower.

So, broad based pressure but getting severe in metals processing. Here is the value added split by sub-sector:

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I’m wondering what role the developing housing construction slowdown is now having on these indexes. For instance, steel is in part under pressure for this reason. Either way, it’s still not much fun in manufacturing.

Australian Manufacturing Activity Index Q2 2012

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.