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Australian Manufacturing Shrank in April on Record Currency

Australian manufacturing contracted in April for the seventh time in eight months as a record-high currency and consumer caution hurt textile and other producers, a private report showed.

The manufacturing index was 48.4 in April from 47.9 a month earlier, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A number below 50 indicates contraction.

The nation’s factories are lagging behind the mining industry, which is expanding to meet Chinese demand for raw materials and pushing the job market near a level the government views as full employment. The Australian currency’s 19 percent gain against the U.S. dollar in the past year has hurt export competitiveness.

“The continued weakness of the Australian PMI reflects consumer caution and the substantial erosion in the competitiveness of the industry related to the volatile and rising dollar,” Heather Ridout, chief executive officer of the industry group, said in a statement. “The uncertainty of how this will evolve is the essence of the pressures on the industry.”

Reserve Bank of Australia Governor Glenn Stevens is likely to leave the benchmark interest rate unchanged at 4.75 percent tomorrow for a fifth straight meeting, according to a Bloomberg News survey of economists.

Budget Release

The strength of the local dollar is allowing Stevens to hold off on rate increases. The currency touched a record $1.1011 today, the highest since it was freely floated in 1983.

Next week’s federal budget needs to address the challenges facing manufacturers, Ridout said.

“There is clearly a requirement for more proactive policies to build productivity in manufacturing through investments in workforce development; energy efficiency; the exploration of export opportunities” and research-and- development, she said.

The index’s reading on wages rose 2.9 points to 60.1 and inventories advanced 1.9 points to 49.3, today’s report showed. Supplier deliveries climbed 1.7 points to 48.3.

A gauge of employment rose 1.3 points to 45 in April, and new orders declined 2.7 points to 46.4, the report showed. The production measure advanced 2.4 points to 53.3.

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.

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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