First the good news.
The Australian Industry Group (AiG) has reported that its performance of manufacturing index (PMI) rose 2.9 points in October to 49.4, just shy of the 50 level which signals the expansion/contraction zone.
AiG said that “of the five activity sub-indexes, production (up 8.6 points to 51.1), new orders (up 5.3 points to 51.1) and stocks (up 5.3 points to 50.8) all moved above 50 points”.
That’s good news, as is the pick-up in manufacturing exports which rose 8.5 points to 50.7.
But the Aussie dollar is still a heavy weight it seems, with respondents saying that despite the fall since early September, “it remains relatively high and is still supporting intense import competition”.
In a nod to the lack of, or need for, animal spirits in the economy, the AiG also reported that:
More generally, businesses remain cautious and reluctant to invest. As the end of Australian automotive assembly moves closer and mining expansion slows, many manufacturers remain wary about the outlook for locally-made products and components.
AiG CEO Innes Willox said that the “slide in manufacturing activity we have seen for the past couple of months has eased, with the sector broadly stable in October”. But he added because of the uncertainty and cautiousness of businesses at present, they are “hesitant about undertaking the investments needed to underwrite future productivity and employment growth”.