The manufacturing sector has posted a ‘sluggish start’ to 2013, according to the latest Australian Industry Group’s Australian Performance of Manufacturing Index.

The Index recorded a 3.1 point drop to 40.2 in January, where readings below 50 indicate a contraction, and the distance from 50 indicating the strength of the decrease.

A cautious outlook, soft demand and the strong Australian dollar were cited as factors affecting growth in the month. New orders across manufacturing contracted for the eleventh consecutive month - down 6.3 points to 39.4. Meanwhile, input prices continued to rise (with the input price sub-index registering 58.5) and selling prices fell further (with the selling price sub-index registering 40.0).

“The well-entrenched pressures that have been confronting the manufacturing sector for several years are being compounded by a slowing in the broader economy,” CEO of the AI Group Innes Willox said.

The main findings of January were:

  • The latest seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) recorded 40.2 in January - down from 44.3 the previous month (readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).
  • New orders fell 6.3 points to 39.4.
  • Across the sub-sectors - only wood and paper products recorded an expansion in activity (63.7) in January.
  • Manufacturing production was also weaker - 40.4.
  • The fall in manufacturing exports intensified in January - down 2.1 points to 31.1.
  • Wages were higher (60.0) and input costs remained high (58.5).
  • Selling prices fell 3.0 points to 40.0 in the month.
  • No states recorded an expansion in activity in January.

The full report can be found here