Manufacturing Growth Slows in August Amid Australian Election Deadlock

Australian manufacturing growth slowed to the weakest pace in five months as uncertainty about the outcome of national elections and the stronger local currency triggered weaker growth in new orders.

The performance of manufacturing index fell 2.7 points to 51.7, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A figure above 50 shows the industry is expanding.

Demand weakened last month as neither Prime Minister Julia Gillard nor opposition leader Tony Abbott gained a majority in the Aug. 21 election, meaning one side must win negotiations with independent lawmakers to form government. Still, manufacturing has expanded since the start of the year as the nation’s economy strengthens, helped by China’s demand for raw materials.

“Election uncertainty, together with intense import competition and other ongoing impacts of a strong Australian dollar, is generating headwinds for manufacturers,” said Heather Ridout, chief executive officer of the Australian Industry Group. “There are indications that the pace of recovery could strengthen in the months ahead,” as demand for clothing, footwear and furniture gains.

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

A gauge of new orders slipped 6.1 points to 50.6, today’s report showed, and a sub-index of production dropped 5.8 points to 51.5. Employment gained 3.6 points.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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