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Factory activity slowest in 14 months

AAP logoAAP 31/08/2016 Marty Silk

Australian factory activity has slumped to its lowest level in more than a year on the back of a slowdown in food and beverage manufacturing.

The Australian Industry Group's performance of manufacturing index (PMI) edged down 9.5 points to 46.9 in August, falling below the 50-level indicating the sector is expanding.

Factory activity has now fallen to its lowest level since June 2015.

"These low results bookend a run of 13 months of expansion," Ai Group chief executive Innes Willox said in a statement on Thursday.

"A sharp fall in food and beverages in August, which had been the mainstay of recent growth, was a major factor in the correction seen in manufacturing activity."

Textiles and clothing, and machinery and equipment also slipped into contraction in August.

The other five manufacturing subsectors reported expansion in the month, led by strong growth in printing and recorded media, and metal productions.

Six of the PMI's seven activity subindexes also fell in August, with all but one of those slumping more than 10 points, after expanding in July.

Deliveries plummeted 16.4 points to 46.2, exports fell 14.8 points to 44.7 and sales were down 14.1 points to 45.7.

While production fell by just 9.4 points, it is now the subindex contracting the most rapidly at a level of 43.0.

Only new orders remained in expansion over August, although at a much slower pace after falling 7.3 points to a level of 51.5.

"Continued growth in new orders is a ray of optimism for a sector keen to avoid this correction becoming a downturn," Mr Willox added.

"The continuing patchiness both of the manufacturing sector and the broader economy underscores the importance of lifting confidence and improving policy settings in areas such as workplace relations, taxation and budgetary policy."

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