Australian Manufacturing Grew Third Straight Month in February

Australian manufacturing expanded for a third straight month in February, led by clothing, footwear and transport equipment, as the industry adjusts to a stronger currency, a private survey showed.

The manufacturing index was 51.3 last month compared with 51.6 in January, the Australian Industry Group and PricewaterhouseCoopers said in a survey released today. It was the first time since August 2010 the figure has held for three straight months above 50, the dividing line between expansion and contraction.

“Australian manufacturing remains resilient in the face of the high dollar and difficult trading conditions,” Innes Willox, chief executive-designate at AIG, said in a statement. “The movement of new orders into positive territory for the first time since the middle of 2011 is also encouraging.”

The Reserve Bank of Australia reduced its benchmark interest rate in November and December last year as inflation cooled and global risks increased. Its unexpected pause in February at 4.25 percent and a resource investment expansion have spurred the currency, which reached a six-month high of $1.0845 following the decision and has appreciated 5 percent this year. The local dollar traded at $1.0733 earlier today.

BlueScope Steel Ltd. (BSL), the country’s largest steel producer, in August shuttered its export division. Toyota Motor Corp. and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength. Alcoa Inc. (AA) is reviewing the future of an aluminum smelter.

Better Productivity

“We can expect the recent spate of announced job cuts in the manufacturing industry will lower the Australian PMI employment sub-index in coming months,” Jeremy Thorpe, PwC’s partner for economics and policy, said in a statement. “The job reductions are a clear demonstration of the manufacturing industry’s focus on improving labor productivity.”

The currency’s gains have hurt earnings for manufacturers, tourism and retailers, helping create what the RBA has referred to as a multi-speed economy with those industries lagging behind the performance of companies linked to the nation’s mining boom.

The manufacturing index’s reading on wages fell 3.7 points to 57 and inventories dropped 3.2 points to 51.1, today’s report showed. Supplier deliveries declined 3.8 points to 51.8.

A gauge of employment slid 1 point to 50 in February, while new orders gained 1.8 points to 51.7, the report showed. The production measure advanced 1 point to 51.7.

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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