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July 1, 2009 – 9:49AM

Activity in the manufacturing sector continued to decline in June, although the pace of easing slowed, a survey showed.

The Australian Industry Group/PricewaterhouseCoopers Performance of Manufacturing Index rose by 0.9 index points in June to 38.4 points, seasonally adjusted.

June marked the 13th consecutive month that the index was below the 50-point level, indicating contraction in activity.

AiGroup chief executive Heather Ridout said on Wednesday some sectors had benefited from the federal government’s fiscal stimulus packages, lower interest rates and a lift in consumer confidence during June.

“While the slowing in declines in manufacturing inventories, employment and deliveries is encouraging, the continued weakness in new orders and production raises doubts as to whether this trend will be sustained,” Ms Ridout said in a statement.

“There will need to be an improvement across all sectors in the months ahead, particularly automotive, transport and construction industries which reported weakness and impeded manufacturing production in June.”

In the survey of more than 500 companies, four of the 12 sectors – machinery and equipment, textiles, basic metal products and fabricated metal products – recorded easing in the decline of activity.

Two sectors, food and beverages, and clothing and footwear, reported increases in activity during June, reflecting the effects of the federal government’s second stimulus package and generational-low interest rates, the report said.

New orders remained weak, while employment, deliveries and inventories declined at a slower rate.

PricewaterhouseCoopers global leader of industrial manufacturing, Graeme Billings, said weak markets were placing pressure on the ability of firms to manage costs and maintain profit levels.

“The weakness in manufacturers’ markets illustrated by continued declines in new orders puts further pressure on profit margins as prices continue to fall at the same time as input prices and wages growth remain stable,” Mr Billings said.

“This only re-emphasises the need for firms to continue to focus on ensuring cash flow through such strategies as reducing unit costs through inventory and supply chain management and managing debtors and creditors effectively,” Mr Billings said.

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