Manufacturing activity has remained subdued in February, according to the Australian Industry Group (Ai Group) PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI).
The Australian PMI rose 2.2 points to 51.4 (above the key 50 level separating expansion from contraction) following a drop of 8.4 points in January.
“The manufacturing sector has seen more subdued activity over recent months. In part, this has reflected the effects of shutdowns over the summer holiday period. However, it is clear that concerns over global economic prospects, especially in the United States, higher Australian interest rates and rising input costs have had an ongoing negative impact on the sector,” Ai Group chief executive Heather Ridout said.
“The persistently high Australian dollar has also undermined any potential offsetting boost for manufactured exports at a time when demand for global manufactures is strong. While inflationary pressures have clearly built over recent months, economic policy needs to take account of recent overall tightening of monetary conditions and its lagged impact on the economy,” Ridout said.
According to PricewaterhouseCoopers global leader of industrial manufacturing Graeme Billings, today’s Australian PMI result illustrates the increasing cost pressures facing manufacturers, the associated squeeze on margins and the continued impact these challenges have.
“Cost pressures are unlikely to abate soon and this re-emphasises the task facing business in driving operational efficiencies and increasing overall productivity,” Billings said.
The Australian PMI also indicates that a slight improvement in activity in February has reflected a lift in new orders and input deliveries, while stocks also grew, though at a slower rate than in January. \
Input cost price growth accelerated in February, while selling prices rose more slowly than in recent months, indicating some margin squeeze, according to the Australian PMI.
Key contact:
Heather Ridout
Ai Group
www.aigroup.asn.au
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