Manufacturers throughout the building and construction industry continue to struggle, with the latest data showing yet another monthly decline in construction materials manufacturing throughout Australia.
The data comes amid turmoil in the South Australian timber industry and difficult market conditions in the manufacturing of steel, bricks, tiles and many other construction materials.
In August, the construction materials segment of the manufacturing sector suffered a moderate contraction in activity, according to the Performance of Manufacturing Index report published by Australian Industry Group and PricewaterhouseCoopers.
The latest contraction – the fourth in a row, comes amid increasingly challenging conditions confronting manufacturers in the sector, with a strong dollar eroding export competitiveness at a time of weak domestic conditions.
In timber manufacturing, up to 1,000 jobs are at risk in South Australia, with manufacturer Carter Holt Harvey warning that its local operations will be forced to close unless it can negotiate a reduction in prices for logs with government business enterprise Forestry SA.
Continued challenges in steel making, meanwhile, were highlighted by BlueScope’s recent $238 million underlying loss announced last month, though that result came with some positives – notably BlueScope’s recently announced joint venture with Nippon Steel.
Recent data has also shown that activity in the production of other materials, such as bricks and tiles, is well down.
One of the few strong performers is the cement manufacturing industry, where the most recent ABS figures suggest that production of Portland cement was up by around one eighth in the June quarter this year compared to the same time last year on the back of strong civil construction activity.
More broadly, the latest figures show that overall manufacturing conditions across most of the spectrum in Australia remain challenging.
At 43.1, the Performance of Manufacturing Index indicates that overall manufacturing activity contracted again in August – the sixth consecutive month of decline – with survey respondents citing a subdued housing market, soft retail demand, rising utility charges, subdued export markets and a strong Australian dollar as key impediments to the outlook going forward.
Any reading below 50.0 on the index indicates a contraction in activity in the month in question.
Intense pressure on margins continues amid persistent declines in selling prices (45.8) and increases in wages following five consecutive months of employment declines.
On the bright side, however, a reading of 49.1 on the index indicates that the six-month-long decline in new orders has moderated.