Manufacturing slumps to GFC lows

Manufacturing activity slumped in April to the lowest level since the height of the global financial crisis in May 2009.

The Australian Industry Group's Performance of Manufacturing Index (PMI) was down 7.7 points last month to 36.7, well below the key 50-point level that separates expansion from contraction.

The index revealed contractions in seven out of the eight manufacturing sub-sectors, with only wood and paper products growing.

The weakest results were in food, beverage and tobacco manufacturing and metal products.

In a negative sign for the near term outlook for the sector, production, new orders and employment all fell sharply last month.

The Australian Industry Group's chief executive, Innes Willox, says the export sub-index has now hit its lowest level since being added to the survey in 2004.

"The strength of the Australian dollar is a major burden on domestic producers and our rising unit labour costs and high energy prices are adding to pressures," he noted in the report.

"Together they are undermining competitiveness in both the local market and in export markets and they are proving a major barrier to inbound investment in domestic manufacturing facilities, with Australia now ranking among the highest cost manufacturing centres internationally."

Mr Willox says the manufacturing sector is hoping for some further assistance in the upcoming federal budget.

"While a further reduction in interest rates would provide some very welcome relief, major efforts are needed, including from the Commonwealth Government in its upcoming budget, to help lift the pace of investment and innovation in the sector and assist in building the management and workforce capabilities that are needed for Australian manufacturing to play its role in a balanced and diversified economy."

Source: ABC News, 1 May 2013