Manufacturing perma-recession deepens

It’s our monthly update of the manufacturing perma-recession from the AIG today and it does not disappoint:


The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell by 3.6 points to 45.4 points in February (seasonally adjusted). This indicated a third month of contraction in conditions (readings below 50 points indicate contraction) across the manufacturing sector following a brief stabilisation in November 2014.

 The Australian PMI® typically ‘leads’ ABS data for manufacturing output by around 3 months. Recent results from the Australian PMI® suggest manufacturing output (measured as ‘value added’ by the ABS) is likely to be broadly flat in Q4 2014 and so far in 2015.

 Manufacturing exports expanded for a third consecutive month in February, following further falls in the dollar. Much of this growth was concentrated in the food and beverages sub-sector.

 Among the other activity indicators however, manufacturing production contracted (i.e. below 50 points) for the fourth consecutive month while new orders declined for a third month. Manufacturing sales contracted for a ninth month in February. Supplier deliveries and stock levels also returned to contraction this month following a brief expansion in January, while manufacturing employment contracted for a second month.

 Three of the eight manufacturing sub-sectors in the Australian PMI® expanded (i.e. above 50 points) in February. The large food and beverages sub-sector expand for a ninth month, while the relatively small textiles, clothing and furniture sub-sector, and non-metallic mineral products (mainly building materials) both expanded for a fourth consecutive month.

 The lower Australian dollar and its further depreciation since September 2014 have boosted manufacturing export volumes over recent months. However, the lower dollar has also increased prices for imported inputs, which has put further downward pressure on manufacturers’ margins. Despite the pickup in residential building over the past year, the sharp drop in mining construction, the progressive closure of automotive assembly, and weak local business investment, are weighing on demand for locally made machinery and components.


Full report.


  1. ResearchtimeMEMBER

    I know I posted similar comments mid last year – not to be a broken record, but just to reiterate that these manufacturing statistics appeared to also include one off fabrication – in particular for the LNG and Mining sectors, which actually inflated our manufacturing base. I also argued that whether it was wise to include these industries as they are not necessarily sustainable in the LT. Which I guess is currently being played out.

    We are soooo toast!

    • RT

      I’m guessing a lot relates to housing construction as well?

      We are soooo burned toast! 🙂

      • ThicklySliced


        Already were are losing the skill and knowledge that made this country……grate.

        (Toast does not come from packages… comes from toasters….)

      • Would it be easier for Australians to access the toast if it was covered by overburden?

      • Mining BoganMEMBER

        OH&S will have stopped us from using toasters by then. Way too dangerous with all that electricity and heat.

      • AlbyManglesMEMBER

        MB perhaps strict OH&S laws would result in you needing a license to toast

        a license that cost $485 and must be renewed every 12 months

      • Didn’t Coles already get caught doing that by ACCC tipped off by Jeff Kennett of all people about bringing Irish dough into the country as fresh baked bread?

      • Mining BoganMEMBER

        Hmmm…there’s an idea. We could make a motza getting everyone qualified in toast.

        Get Tony and Joe on the phone! We’ve just saved the economy!

      • Mining Bogan,

        Here starts the emerging ‘new skilled’ economy. We now have;

        – Washing each others laundry (Will be called ‘Personal Sanitiser’)

        – Barista by day (Will be mispronounced hence named ‘Barrister’)

        – Packing Woolies and Coles shelves by night (Supply-chain Engineer)

        The new addition

        – Unpacking toast (Process Distribution Engineering)

        Here comes Australia’s ascent.

      • Mining BoganMEMBER

        I like you, Plex.

        Going through your list and I’ve realised that for the first time in my life I’m multi-skilled and an asset to this fine country.

        There’s a big, fat tear of joy rolling down my cheek as I type.

    • You are quite correct, Researchtime. The RBA made a similar observation in its mining research paper released last year. That is, the manufacturing industry was a beneficiary of the mining boom (for reasons you outlined) as much as it was a victim (via Dutch disease).

    • mine-otour in a china shop

      For Sale via Auction: 1920’s 2 bed house – renovators dream – comes with a retro toaster in each room to impress your guests. Guide Price $2.4mn.

  2. I think many underestimate this:

    “However, the lower dollar has also increased prices for imported inputs, which has put further downward pressure on manufacturers’ margins.”

    Nearly all productive businesses hanging in there do so by significantly offshoring nearly all their main production costs.

  3. Have you heard of the lag effect ?

    Macrobusiness should publish the Lifeline contact number at the top its web page as well ……

    • Or create a specific line for Traders.
      “If you or anyone you know is having problems being on the wrong side of this market call this number “

  4. In Victoria, we have had building approvals in the last six months of last year of $95 million for new Factories or places of Secondary Production. That works out to be about a massive $16 per person. With such levels of heavy levels of investing in our manufacturing sector nothing could go wrong.

    • What would the number look like if you subtracted the value of factories expected to be converted to warehouses, residential or simply abandoned?

    • GunnamattaMEMBER

      I saw that this morning and couldnt but think ‘good on him’

      Unlike the vast bulk of our politicians this guy has actually worked with the punterariat, doing punterariat gigs and has an experience base which includes things the punterariat deal with.

      • No wonder they want to change the electoral system to keep Senator Muir and his ilk away from Parliament.

  5. This calls into question the whole benefit of a lower currency in a country without any significant manufacturing base. Their is relatively little import replacement, the job gains in benefitting sectors are largely offset by the job losses in the penalised sectors and the private wealth in international terms of most people is reduced by the fall in the currency.

    In USD terms our houses haven’t increased in value at all since 1 AUD bought 1.08 USD, and they have barely increased against the EUR. Similalry our share market has fallen from USD28 to less than USD24 since April 2011 (based on EWA, the USD ETF for Australian share market)

    Devaluation of the currency is not the powerful tool to revive the economy that it was when there was 20% manufacturing to replace imports when the currency fell.

    • You need to think a bit more about the comments above re: the proportion of manufacturing dedicated to the now declining mining construction effort. That’s got to work it’s way through the system before a revival is possible.

      Also, if manufacturing is to be revived by a lower dollar, the time frame required is at least five years.

  6. Personally I cant stand the smell of burnt toast, therefore I cant imagine myself or other similarly afflicted and similarly skilled) individuals from ever residing in Australia again.

    I’ll keep the passport as a sort of insurance policy, if it all goes pear shaped then I’ll return to exercise my birth right entitlement to rort the welfare system.

  7. BubbleyMEMBER

    I would like to suggest business tax concessions to stimulate manufacturing in this country.

    Not that I own a manufacturing business or anything…..