Conditions in Australian manufacturing continue to deteriorate, with the latest report showing that activity declined in September for the third straight month.
The Performance of Manufacturing Index (PMI), published by Australian Industry Group (AIG) and Pricewaterhouse Coopers (PwC), came in at 42.3 last month. Activity in the sector has now declined for three straight months on end. Any reading below 50 on the index represents a decline in activity during the month in question.
New orders also fell. New orders came in at 44.6 – up slightly from August but still registering the third straight month of decline.
The AIG report is the latest to confirm weakening manufacturing conditions. On September 22, the quarterly ACCI-Westpac Survey of Industrial Trends showed a decline in conditions during the past quarter, with its composite index slipping 1.2 points to register 47.7.
Australian Industry Group Chief Executive, Heather Ridout, said: “Caution continues to be the order of the day with most respondents uncertain about the outlook and citing little visibility in relation to business conditions beyond the short term.”
“The usual suspects of weak domestic demand, the strong Australian dollar, increased overseas competition and uncertainty surrounding proposed carbon pricing, continue to weigh on the sector”.
PwC Australian Head of Industrial Products Graeme Billings agrees, saying that manufacturers must focus on striving for excellence and keeping close to customers.
“Manufacturers continue to battle very tough business conditions”.
One bright spot was the clothing and footwear sector, which registered just over 90 on the index. However, report authors caution that this reading could have been influenced by poor survey response rates. Activity declined in September in ten out of twelve manufacturing sub-sectors.
Moreover, persistent weakness in the sector affects demand for industrial space and therefore levels of construction activity on factories, warehouses and other industrial facilities.
Already, the multi-billion dollar Penola Pulp Mill project in South Australia has been abandoned following the bankruptcy of the project’s owner, Penola Pulp Mill Pty Ltd. Another project, the $2.96 billion Collie Urea Plant, is in doubt as project owner Perdaman Chemicals and Fertilisers remains locked in a dispute with a key project supplier.