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Manfacturing picks up, wage growth slows

AAP logoAAP 30/11/2016 Garry Shilson-Josling, Economist

Manfacturing activty is picking up but employment growth in the sector is sluggish and wages growth is at its slowest pace this decade.

The Australian Industry Group's Performance of Manufacturing index, based on a range of survey measures including sales, exports, employment, and new orders, rose by 3.3 points to 54.2, well over the 50 mark dividing expansion from contraction.

"Comments from manufacturers in November indicate a general pickup in demand and confidence, while the relatively lower dollar and increased exports continue to provide momentum to many manufacturers," the Ai Group said.

But the good news did not extend to workers in the sector as the survey's indicator of wages growth sunk to its lowest point this decade and the index for employment growth, while moving from negative to positive, remained weak.

The sub-index for employment rose from a contractionary 47.7 in October and a 12-month average of 49.2, but at 52.3 in November signals only weak jobs growth.

The sub-index for wages slumped by 5.2 to 53.8, equal to March's level which was the lowest since September 2009.

The AiGroup said this suggested a continuation of the weak wages growth as indicated by the Australian Bureau of Statistics' wage rates data for the September quarter.

The survey also confirmed the role of competitive pressures in keeping a lid on inflation.

"Comments from manufacturers point to difficulties in passing on full input cost increases," AiGroup said.

"The RBA (Reserve Bank of Australia) recently noted that such perceptions of lower pricing power by businesses are becoming more widespread."

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