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SYDNEY - Higher interest rates and volatility in financial markets have contributed to a disappointing fall in manufacturing activity, the Australian Industry Group (AiGroup) says.
The AiGroup-PricewaterhouseCoopers Australian Performance of Manufacturing Index (PMI), released today, fell 5.0 points in August to 52.4 as growth in consumer demand and new orders waned.
Although the index remains above the 50-point level that separates expansion from contraction, AiGroup chief executive Heather Ridout said the fall was disappointing in the context of robust growth in the preceding months of 2007.
Food and beverages, basic metal manufacturers - including exporters - and small firms, took the largest hit from the decline in demand, the PMI showed.
While employment activity fell overall, it was only a marginal decline with some sectors recording gains.
Employment gains were strongest in the fabricated metal products sector, after falling in July, and in miscellaneous manufacturing, the figures show.
There was also employment growth in the food and beverages, chemicals, petroleum and coal products, and transport equipment sectors, albeit at a significantly slower rate.
However, employment fell in the clothing and footwear, paper, printing and publishing, construction material products and machinery and equipment sectors.
"Manufacturing activity has been quite robust throughout the year, despite quite strong headwinds," Ms Ridout said.
"Impacting on activity is the high Australian dollar, an unsteady housing market, skill shortages, higher interest rates, and a fragile stock-market," she said.
"If confidence is strong and demand holds out, however, we're hopeful that industry will ride it out, albeit at a potentially lower level of activity," Mrs Ridout said.
Despite activity having fallen, August represented the 15th consecutive month of growth in manufacturing activity.
- AAP
