Manufacturing demand weakens as costs rise
Ai Group chief ecexutive Heather Ridout said that while production expanded in five of the 12 sectors surveyed, the weakness in activity was particularly hard felt in consumer-based sectors, including clothing and footwear.
"The confluence of higher fuel costs, the strong Australian dollar, import competition and tight export markets resulted in a falling away in demand in the September quarter," she said.
"Adding to the more cautious consumer spending there was softening construction activity and continuing pressure on manufacturers from rising costs, which show little sign of abating. Manufacturers are in part responding to these circumstances by cutting inventories and continuing to invest in new equiptment."
The decline in production was led by the clothing and footwear industry, with approximately 50 per cent of firms suffering from the tough conditions.
The sector was followed by the fabricated metal products and construction material manufacturing sectors, both of which also suffered heavy declines.
On an unadjusted basis, 10 of the 12 sectors surveyed also recorded falling profits. The clothing and footwear, textiles and paper, printing and publishing sectors reported the deepest declines, with profits increasing marginally in the wood, wood products and furniture sectors.
Sales and new orders fell for the first time since 2001, with only two of the 12 sectors recording higher sales.
Sales fell in nine sectors, with the largest declines once again experienced in the clothing and footwear, textiles and miscellaneous manufacturing sectors, where more than half of the firms surveyed experienced sharp declines.
New orders deteriorated in the chemicals, petroleum and coal products, clothing and footwear and miscellaneous manufacturing sectors, where approximately 40 per cent of firms reported declines.
Council for Textile and Fashion Industries of Australia (TFIA) executive director Ashley Van Krieken said that while the figures are an acurate reflection of the pressures currently facing the manufacuring industry, Australia was just one in a number of countries accross the globe reporting a decline in trade.
"Interestingly enough it's very similar overseas, where there is also a lot of concern over in the manufacturing industry over rising cost pressures," he said.
"Australia is definately not alone."