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Imports and dollar hurt manufacturing

Sep 01, 2014

Manufacturing in Australia took a backward step in August, hurt by competition from imports, the high Australian dollar and caution among businesses.

The Australian Industry Group’s Performance of Manufacturing Index (PMI) fell 3.4 points to 47.3 in August.

The reading below 50, indicates a fall in manufacturing activity.

In July, the index was 50.7, the first monthly increase in manufacturing activity in eight months.

Ai Group chief executive Innes Willox says the surge in housing construction is not flowing through to increased demand for locally-made goods.

“In part this appears to be due to higher levels of import competition and in part because the simultaneous reduction in engineering construction is detracting from demand in these sub-sectors,” he said on Monday.

“More generally, manufacturers remain cautious about the outlook and continue to focus on reining in their costs, as they battle these weak trading conditions.”

Willox said many respondents to the survey expressed ongoing concern about the persistent strength of the Australian dollar, which has lowered demand for locally-made products.

Of the eight manufacturing sub-sectors, only the large food and beverages and the smaller wood and paper products sub-sectors expanded.

Earlier today the Australian dollar was trading at 93.25 US cents, down from 93.56 cents on Friday.

OM Financial senior client advisor Stuart Ive said stronger US manufacturing data helped lift the greenback on Friday night, offsetting weaker consumer spending figures.

“The US data came out better than expected so we saw a strong resurgence in the US dollar,” he said.

The MNI Chicago Business Barometer showed a stronger than expected expansion in the manufacturing sector in August, while Commerce Department figures showed a 0.1 per cent decline in consumer spending for July.

Ive said a string of recent strong economic data from the US was supporting the greenback and the Aussie dollar was likely to be under pressure over the next few weeks.

 

 

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