Manufacturing recession rolls on

The Australian Industry Group (AIG) manufacturing PMI is out and shows some improvement in August but is still mired in recession:

• The seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) improved by 4.4 points to 46.4 in August 2013.
• August marked the 26th consecutive month of contraction in the Australian PMI® (readings under 50 points indicate contraction). This is the longest period of contraction in the 21 year history of the Australian PMI®, which commenced in September 1992.
• The production, employment and new orders sub-indexes all picked up in August, but remained in mild contraction (below the 50 point level that separates expansion from contraction).
• Local demand and orders remain patchy, with some growth spots emerging in NSW and from essential maintenance contracts.
• The majority of respondents continue to characterise the local economy as lacking in activity and confidence, over and above the usual winter lull. Around 10% of respondents said the federal election (on 7 September) is an additional source of uncertainty at present, down from 15% who made similar comments in July.
• The effect of the recent devaluation in the Australian dollar became more visible in the Australian PMI® in August. So far, the lower dollar is pushing up prices for imported inputs, with the input price sub-index hitting its highest level in August (75.1 points) since April 2011 (79.9 points). The lower dollar is not yet showing up in stronger exports. A small number of respondents noted an improvement in local orders that they attributed to the lower dollar (through better competitiveness against imports).

As expected, the lower dollar is doing little but make the problem worse for now:

It appears, however, that the increases in housing construction are helping in NSW. Overall it’s still a very muted report, though at least the slide has eased:

PMI Report August 2013 FINAL.pdf by Lauren Frazier