Bloomberg News

Australia’s October Manufacturing Was Declining at a Slower Pace

November 01, 2011

Nov. 1 (Bloomberg) -- A gauge of Australian manufacturing declined at a slower pace in October as weaker sales and a stronger currency continued to weigh on industries from clothing to publishing.

The manufacturing index rose to 47.4 from 42.3 in September, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today. It was the seventh reading in the past eight months below 50, the dividing line between expansion and contraction.

“While it is encouraging that the pace of the decline in manufacturing activity eased in October, the sector remained in negative territory,” Heather Ridout, chief executive officer of the industry group, said in a statement. “New orders remained soft, suggesting that there are no real signs of a substantial, near-term pickup in the sector.”

Reserve Bank of Australia Governor Glenn Stevens will weigh reducing the benchmark interest rate today for the first time since April 2009 as policy makers balance weaker global growth and domestic inflation against a mining-investment boom. Sixteen of 27 economists surveyed by Bloomberg News said Stevens will cut borrowing costs by 0.25 percentage point to 4.5 percent after consumer-price growth slowed last quarter.

Strong Currency

The Australian dollar reached $1.1081 on July 27, the highest level since it was floated in 1983, before declining in subsequent months amid concern about the fallout from Europe’s sovereign debt crisis and the strength of the U.S. recovery. It rebounded 9 percent in October, the biggest monthly gain since May 2009.

Australia, the only developed economy to avoid a contraction during the global recession of 2009, is experiencing what RBA Governor Stevens has called a “structural adjustment” prompted by the biggest mining boom in a century and the resulting climb in the nation’s currency.

BlueScope Steel Ltd. in August announced plans to shed about 1,000 jobs and shut a furnace because of a second-half loss due to high raw-material costs and the strong local dollar.

The manufacturing index’s reading on wages rose 0.9 point to 62.8 and inventories gained 4.7 points to 47, today’s report showed. Supplier deliveries added 7.1 points to 45.7.

A gauge of employment rose 5.9 points to 51.6 in October, and new orders advanced 2.3 points to 46.9, the report showed. The production measure advanced 6.7 points to 45.9.

The manufacturing survey, which is similar to the U.S. ISM index, polled more than 200 companies about production, new orders, deliveries, inventories and employment.

--Editors: Garfield Reynolds, Edward Johnson

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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