Manufacturing industry takes a hit

AUSTRALIA’S manufacturing industry shrunk last month, according to a survey of companies, despite government spending giving some industries a boost.

Conditions in the sector were the worst they have been in almost three years, the polling by the Australian Industry Group indicates.

The group’s monthly performance of manufacturing index has fallen 3.3 points to 49.4. Results below 50 indicate that activity is contracting.

It is the first time since August 2016 – 34 months – that the index has clocked in below 50. The survey results suggested increased federal government spending was offsetting a decline in demand in the broader economy for manufacturers in the building, machinery and metals sectors.

“Respondents selling (building-related) products to govSUNCORP ernment customers reported strong conditions but other respondents reported worse conditions in June due to slower residential building activity,” the Ai Group said in a report published with the results.

“Heavy industrial manufacturers continue to report weak conditions except for those selling machinery and equipment into the mining and defence sectors.”

The report said prices for manufactured items were steady or lower in June.

“Some respondents noted that the recent deceleration in demand across the economy has increased competition for manufacturers, many of whom have responded with price discounting to keep orders and production moving,” it said.

A subindex measuring selling prices fell 2.8 points during the month to 49.6, the first drop below the 50-point mark this year.

A slump in retail spending was thought to be behind a further contraction in activity for textiles, footwear and printing manufacturers, with little prospect of improvements for the sector anytime soon.

“Respondents reported a fall in local sales due to lower household spending on discretionary items and home improvements in June,” the report said.