01/08/2008 - 08:47

Manufacturing activity dips but WA up

01/08/2008 - 08:47

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Western Australia is one of two states that have defied the downward path of Australia's manufacturing activity, which sunk to a near three-year low as high interest rates slow the economy.

Manufacturing activity dips but WA up


Western Australia is one of two states that have defied the downward path of Australia's manufacturing activity, which sunk to a near three-year low as high interest rates slow the economy.

The Australian Industry Group/PricewaterhouseCoopers performance of manufacturing index (PMI) fell 0.1 index points to 46.9 in July.

The reading was below the 50-point level, which separates an expansion from a contraction, for the second straight month.

It was also the weakest reading for the survey of about 200 companies since November 2005, when the PMI was 43.7.

WA along with South Australia was the only states to record an increase in manufacturing activity.

Australian Industry Group chief executive Heather Ridout said the weakness in manufacturing was not surprising considering the tighter financial conditions.

"The economy more generally, is feeling the ongoing impacts of the Reserve Bank's tightening of monetary policy as well as market-based rate rises," she said.

"Inventories were run down significantly, suggesting continuing weaker demand and the potential for further falls in production."

Manufacturing activity grew in five sectors during July, compared to two in June.

"Manufacturers cited positive effects on activity from solid infrastructure and mining related demand," the report said.

Production and employment fell at a slower rate in July than the previous month.

However, stocks and new orders fell, placing pressure on production, the report said.

PricewaterhouseCoopers global leader of industrial manufacturing, Graeme Billings, said the fall in the Australian PMI for July showed continuing pressure on manufacturing profitability.

"The pressures flowing from slower market growth, rising input costs and the ongoing strength in the Australian dollar are a mix of both cyclical and long-term factors affecting profit margins," he said.

The Australian dollar reached a 25-year high of 98.50 US cents on July 16.

 

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