Energy costs cloud on our manufacturers
GROWTH in Australia’s manufacturing sector slowed in September as high energy prices continued to put pressure on profits.
After reaching a 15-year high in August, the Australian Industry Group’s (Ai) Australian Performance of Manufacturing Index fell by 5.6 points to 54.2 points in September.
Readings above 50 points indicate expansion in activity.
September marked the 12th straight month of expansion for the manufacturing sector — the longest run of expansion since 2007.
Ai chief executive Innes Willox says the recovery in manufacturing activity is con- tinuing, but conditions appear to be moderating.
“Of great concern to all manufacturers continues to be the impact of energy and gas prices on their bottom line,” Mr Willox said. “Mounting energy costs are further squeezing already-fragile profitability.”
Mr Willox also said that last orders were now under way for component suppliers to the Australian car manufacturing sector, and the final impact on the overall manufacturing industry won’t be known until the end of the year.
In September, all eight manufacturing sub-sectors expanded, led by the non-metallic mineral products sub-sector (mainly building materials) which hit a record high.
Building materials manufacturers benefited from strong local demand from apartments and infrastructure projects, plus a spike in exports as the US ordered products needed for rebuilding in the wake of recent hurricanes.
The manufacturing sector also saw demand for mining and agricultural equipment, renewables and utilities.
A longer, colder winter boosted demand for heating equipment.
The Ai survey also showed continued wages growth in September, above the average over the last 12 months.
Higher prices for energy and for key raw materials plus the limited capacity to pass on those increased costs are eroding manufacturers’ margins.