There was a moderate improvement in Australia’s manufacturing activity in the September quarter 2006 according to The Australian Industry Group - PricewaterhouseCoopers Survey of Australian Manufacturing. Results across the sectors in the quarter were very mixed, however, and manufacturers remain cautious about the short-term outlook.
The net balance of firms surveyed reporting higher production increased to +8% in the September quarter 2006, from -2% in the previous quarter. However, reflecting the cautious outlook, growth in sales, new orders and production is forecast to ease over the next three months.
Activity improved in several industrial-based sectors, though this was partly offset by re-emerging weakness across a range of consumer-related industries. Growth was strongest in chemicals, petroleum & coal products, while sharp falls were again reported in transport equipment and construction material products.
Much of the growth, however, was concentrated amongst larger manufacturers (with 100 or more employees), with small to medium firms seeing little improvement.
Ai Group Chief Executive, Heather Ridout, said the moderate strengthening in production and activity had emerged against the backdrop of rising interest rates and higher fuel costs.
"While the recent falls in oil and other commodity prices should provide some support for the sector, manufacturers are not yet convinced the upturn can gain traction. The pick-up in activity has yet to broaden materially across either sectors or states, and continues largely to by-pass both smaller and medium-sized manufacturers,” Mrs Ridout said.
PricewaterhouseCoopers Industrial Products Leader, Graeme Billings, said a lift in exports had contributed to the strengthening in production in the quarter, but that further export gains are needed to ensure a sustainable recovery in the sector.
"Australian manufacturers must continue to work hard to improve their international competitiveness, which requires them to find the right balance between cost reduction and a commitment to investing in research and development, new products and new processes. Governments at all levels can also provide important support by developing policies that reduce the costs faced by manufacturers, as well as fostering a more innovative business environment,” Mr Billings said.
Summary of key findings for the September quarter 2006
- Manufacturing grew moderately, the first increase in a year.
- Production growth reported in six of twelve sectors, up from five previously.
- Growth strengthened markedly in Western Australia and accelerated in Queensland. Production increased in New South Wales and Tasmania, but declined in Victoria and South Australia.
- Manufacturing sales increased, after four consecutive falls, while growth in new orders and exports continued to strengthen moderately.
- Growth in supplier deliveries was steady; inventories increased; and the level of order backlogs was unchanged. Raw material costs and selling prices increased.
- Production growth is forecast to ease in the next three months, reflecting an expected weakening in sales and new orders growth. Export growth, however, is expected to rise.
Background
The Australian Industry Group-PricewaterhouseCoopers quarterly Survey of Australian Manufacturing covers 711 firms with an annual turnover of $50 billion (15% of industrial activity). The results are current as at the first week of June 2006. All results are seasonally adjusted and weighted by each sector’s share of the Australian industry. The survey measures net balance movement, which is the difference between the percentage of companies reporting growth and the percentage of companies reporting declines, for each indicator.
