A measure of Australian manufacturing activity showed yet another month of contraction in December as firms complained of soft demand and a strong local dollar.
The Australian Industry Group's performance of manufacturing index (PMI) slipped dipped 4.1 points in December to 40.2, a 3½-year low and well below the 50 level that is supposed to mark the threshold between contraction and expansion.
The survey of around 200 companies showed broad-based softness with 10 of 11 sectors covered contracting.
The PMI's measure of production fell 2.1 points to 40.4, while that for new orders dropped by 6.3 points to 39.4. Demand for labour was also weak, with the employment index falling 4.4 points to 40.1.
Ai Group chief executive Innes Willox said slowing domestic economic growth had added to the sector’s woes.
‘‘The well-entrenched pressures that have been confronting the manufacturing sector for several years are being compounded by a slowing in the broader economy,’’ he said.
Mr Willox said a string of Reserve Bank of Australia interest rate cuts had yet to provide a boost for manufacturing.
‘‘Successive interest rate reductions have not yet turned conditions around,’’ he said.
‘‘The rate cuts to date have not offset the combined impacts of the substantial contraction in fiscal policy along with the structural challenges due to more intense international competition, the high dollar, ongoing increases in energy costs and increasingly uncompetitive unit labour costs.’’
Inflation pressures were very subdued with selling prices falling amid heavy discounting.
The survey has been consistently weaker than official measures of manufacturing, implying the sector has been stuck in recession for much of the past four years.