The 1200 manufacturing jobs lost at Pacific Brands last week are likely to be followed by further job cuts, according to the latest Performance of Manufacturing index.
The index, compiled by the Australian Industry Group and accounting firm PricewaterhouseCoppers, shows conditions in the manufacturing sector continue to worsen as the downturn intensifies.
The index fell 4.9 points in February to 31.7, well below 50-points level separating expansion from contraction. Ten of 12 manufacturing sub-sectors posted falls in activity.
Most worryingly, the employment sub-index crashed 10 points to 32.8 points, indicating more job losses are ahead. The index measuring new orders fell for the 10th consecutive month.
AIG chief executive Heather Ridout says that despite the Federal Government’s stimulus packages and big cuts in interest rates, there are no signs of recovery in the manufacturing sector and evidence of further trouble ahead.
“The growing impact of the global crisis is now being felt acutely by the manufacturing sector. Demand for exports has fallen and domestic, business and consumer confidence is very fragile,” she says. “Many businesses are reporting difficulty in accessing the finance required not only for investment but also for working capital. These are ingredients that could fuel an escalation of the downturn.
Ridout hopes the Government’s latest cash handouts and the introduction of an enlarged tax break for investment will help boost activity in the short term, but warns the downturn in key trading markets such as China does not bode well for the sector’s prospects.