A gauge of Australian manufacturing fell to a 3 1/2-year low in January as the sustained strength of the currency outweighed the central bank’s reduction in interest rates to a half-century low.
The manufacturing index dropped 4.1 points to 40.2 last month, the lowest level since June 2009, the Australian Industry Group said in a survey released today. The last reading above 50, the divide between expansion and contraction, was in February 2012.
The Australian dollar has averaged about $1.03 for the past two years, compared with around 73 cents in the prior decade, damaging industries outside of mining exposed to international competition. The central bank reduced its overnight cash-rate target by 1.75 percentage points since November 2011 to 3 percent as it seeks to revive industries including construction before a peak in the nation’s resource-investment boom.
“Successive interest rate reductions have not yet turned conditions around,” Innes Willox, AIG’s chief executive officer, said in a statement. “The rate cuts to date have not offset the combined impacts of the substantial contraction in fiscal policy along with the structural challenges due to more intense international competition.”
The manufacturing index’s reading on wages rose 3.4 points to 60 last month, while inventories fell 4.3 points to 35.2, today’s report showed. Supplier deliveries slid 1.9 points to 45.3, and selling prices fell 3 points to 40, it showed.
A gauge of employment fell 4.4 points to 40.1 in January, while new orders dropped 6.3 points to 39.4, the report showed. The production measure edged down 2.1 points to 40.4.
The manufacturing survey, which is similar to the U.S. Institute for Supply Management-Chicago Inc.’s factory index, polled more than 200 companies about production, new orders, deliveries, inventories and employment.