Falling manufacturing orders hit freight volumes

Drop in manufacturing activity slashes production and freight volumes

Manufacturing activity continues to decline, with economy-hit new orders slashing production and freight volumes.

The January Performance of Manufacturing Index (PMI) shows the eighth consecutive fall in manufacturing, though the rate of decline has eased further from November’s record low.

The PMI registered 36.6 in January, up by 2.9 points on the previous month but still well below the 50 point level which separates expansion from contraction.

Australian Industry Group Chief Executive Heather Ridout says the ongoing falls in new orders highlight the challenge for manufacturers and associated industries in the early months of the year.

"As a result, businesses are working on reducing inventories, leading to lower production and consequently putting further pressure on employment," she says.

"While lower interest rates and government stimulatory and other measures are helpful, and may have impacted on the positive outcome for the food and beverage sector, more will need to be done and business will be looking for a further significant cut in interest rates this week."

PricewaterhouseCoopers Global Leader of Industrial Manufacturing Graeme Billings says the January figures confirm manufacturers are facing an increasing squeeze on profitability, which will persist well into 2009.

"While input and wages costs are showing signs of rising more slowly, this is merely the symptom of weaker demand for manufactures and consequently lower production and employment levels," he says.

"In these conditions, where the potential for sales growth is constrained, the key responses remain a rigorous focus on unit cost management, reassessment of business plans and a focus on retaining competitive strengths through innovation in products and operations and the retention of skilled workers."

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