Australian Manufacturing Still In The Contraction Zone

Getty/Sean Gallup

The Australian Industry (AiG) Group has just released its Performance of Manufacturing Index for February which rose a seasonally adjusted 1.9 points to 48.6.

This is good news but the PMI remains in the contraction zone for the moment.

The AiG said that:

“Despite some encouraging signs with production up (51.5) and new orders steady (50), manufacturing employment (47.4), stocks (45.5) and supplier deliveries 44.9) remained in negative territory. Export markets remain particularly tough for manufacturers with the sub-index falling below 30 points.”

Employment is a hot button for this economy and the RBA and the continued Aussie dollar strength, even though it’s back below 90 cents, is a clear and present danger still to Australian-based businesses.

AiG CEO Innes Willox said in a press release:

“While an easing in the pace of contraction and the lift in production in February are welcome, overall conditions in manufacturing continue to reflect the intense pressures from the strong dollar, high energy costs and the legacy of a long period of low productivity growth. Manufacturers’ margins remain under considerable pressure and export sales are very weak. Yet it is critical that manufacturing builds competitiveness and productivity if the economy is to find new sources of growth as the boom in mining investment wanes.”

Still not a great environment for business in this economy it seems.

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