Australia’s manufacturing sector grows marginally in October despite slowdown

Australia's manufacturing sector posted a marginal growth in October amid the slowdown. The growth was above the key 50 point level and touched 50.2. Overall, the performance of manufacturing index by the Australian Industry Group slowed by 1.9 points in October. Since it was above the bench mark level of 50, it is a positive indicator.

Exports up

According to Ai Group chief executive, Innes Willox, the manufacturing sector had the longest expansion in five years, thanks to strong exports though the momentum has eased, reported The Sydney Morning Herald.

Willox said exports were up by 3.3 points in the month to a reading of 55.

“A strong export performance in October helped manufacturing hold onto the gains made by the sector over the previous three months, clocking up the longest expansion in five years,” he said.

Willox said the weakness in many sub-sectors was palpable and impacted the manufacturing industry as a whole. Though the increase in production from domestic sales and employment was notably low, the new orders were not affected. The numbers remained unchanged.

The sectors of wood and paper products were down 5.5 points to 64. Improvements had been noticed in sectors of textiles, clothing, footwear, furniture where a growth of 0.5 points to 56.9 was considered positive. In petroleum, coal, chemical and rubber products, there was a 0.3 points jump and touched 57.5. Non-metallic mineral products posted a growth of 3.6 points to touch 52.6, for the first time in five months.

Rising input prices

The input prices sub-index increased by 1.7 points to 68.6 because of weaker Australian dollar. The manufacturing selling prices sub-index showed a growth by 1.3 points to 49.2 and a very mild contraction was visible.

The October report also reflected the strong competitive pressures and downward pricing faced by the manufactures amidst the strain on margins coming from expensive imports. Willox called up the policy makers to acknowledge that recovery in manufacturing is still fragile.

“The process of broadening the base of growth across the economy remains gradual and tentative," he said.

But one silver lining was that after 16 months, the food, beverages and tobacco sub-sector was broadly stable, reported ABC News.

Holiday trouble

One of the reasons for the slowdown in October was the extra public holiday that Victoria had in the month. It disrupted many manufacturers’ production and sales plans. The timing of the holiday was disruptive and affected their normal operations and delayed production, with many manufacturers being forced to run extra shifts for meeting the pre-arranged schedules, reports FX Street.

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