Australian manufacturing declines to lowest in three years

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http://www.smh.com.au/business/the-economy/manufacturing-declines-to-lowest-in-three-years-20120801-23e2w.html#ixzz22FXxGF4x

Manufacturing declines to lowest in three years

August 1, 2012 - 9:53AM

A gauge of Australian manufacturing declined last month to the lowest level
in three years as the dollar strengthened, aligning the industry's
contraction with others in the US, Asia and the euro area.

The manufacturing index slumped 6.9 points 40.3, the weakest reading since
June 2009 and fifth drop in six months, the Australian Industry Group and
PricewaterhouseCoopers said in a survey released today. A reading below 50
indicates a contraction.

The Australian dollar climbed 2.6 per cent last month versus its US
counterpart, the best performer among 16 major currencies tracked by
Bloomberg, as the central bank paused interest-rate reductions and kept the
benchmark at 3.5 per cent, the highest level among major developed
economies. The global slowdown is beginning to hit Australian companies,
with employers unexpectedly cutting payrolls in June, the first reduction in
four months, and the unemployment rate rising.

"Falls in manufacturing production and employment were the major factors
behind the sharp drop in the Australian PMI," Innes Willox, chief executive
officer at AIG, said in a statement. "The industry is experiencing
substantial pressures driven by the strong dollar, cost increases, slow
growth in domestic demand and competition from lower cost sources of
production."

Australia also started charging its largest polluters for carbon emissions
on July 1 as the nation aims to meet its target of a 5 per cent cut in
pollution from 2000 levels by 2020.

Carbon tax

"As suggested by another drop in new orders and with the full impact of the
carbon tax still to be felt, further falls in overall activity are likely in
the months ahead," Willox said.

The manufacturing index's reading on wages surged 12 points to 71.4 last
month while inventories dropped 7.8 points to 45.8, today's report showed.
Supplier deliveries edged up 0.1 point to 42.4.

A gauge of employment plunged 9.9 points to 38.9 in July, while new orders
dropped 5.8 points to 40.4, the report showed. The production measure sank
9.7 points to 37.8.

The manufacturing survey, which is similar to the US ISM index, polled more
than 200 companies about production, new orders, deliveries, inventories and
employment.

Bloomberg