Lingering softness in new orders and a lower than average selling price is seen the manufacturing sector enter tis eighth consecutive month of contraction, according to the Australian Industry Group’s Australian Performance of Manufacturing Index (Australian PMI).


Seasonally adjusted, the PMI was up 1.1 points in the month to 45.2, where readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease.


Manufacturers cited the high Australian dollar, stronger import competition and rising energy prices as factors inhibiting growth in October. 


Australian Industry Group Chief Executive, Innes Willox, said: "Manufacturers continue to find the going very tough in the face of the strong dollar, weaker demand in export markets and flat conditions across the non-mining sectors of the domestic economy – particularly in commercial and residential construction which has strong linkages with domestic manufacturing.


"For quite some time, the sector has faced a squeeze on margins with prices for non-labour inputs and wages rising steadily while selling prices have been weak.  In October the squeeze intensified with the selling price sub-index recording its lowest level since being introduced into the Australian PMI® over a decade ago.  Non-labour input prices and wages paid by manufacturers continued to rise in October although the pace of wages growth eased somewhat in the month.


"The current contraction in Australian manufacturing is comparable to that being experienced by manufacturers in the recession-hit Euro zone even though the Australian economy is growing relatively strongly overall.  Spurred in part by their lower currency, manufacturing is faring more strongly in the United States despite operating in a considerably weaker domestic economy than Australian manufacturers," Mr Willox said. 
Australian PMI®: Key Findings for October:


  • Despite recording a lift of 1.1 points in October -  the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) remained deep in the red at 45.2 in the month (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).
  • October marked the eight consecutive month of contraction for the Australian PMI®.
  • The new orders sub-index dropped a further 0.4 points to 43.9 in October.
  • Only paper, printing & publishing (51.1) and transport equipment (52.5) expanded in October.
  • Employment across the sector was 46.7- an increase of 6.0 points.
  • Soft demand; weak selling prices, higher energy charges; stronger import competition; and the strong Australian dollar continued to affect manufacturing growth in the month. 
  • Manufacturing production remained mostly unchanged at 45.2.