Australian Manufacturing Contracted in July on Falling Orders

By Jacob Greber

Aug. 1 (Bloomberg) -- Australian manufacturing contracted in July as companies received fewer orders, production slowed and employers cut jobs amid interest rates at a 12-year high.

The performance of manufacturing index shed 0.1 points to 46.9 from June, when it fell 4.2 points, PricewaterhouseCoopers and the Australian Industry Group said in a report released in Canberra today.

The index was below 50 for a second month, signaling manufacturing is shrinking. Manufacturing may cool further after reports yesterday showed retail sales fell by the most in six years and lending to consumers and businesses rose at the slowest annual pace since 2002 after the central bank raised its benchmark interest rate to 7.25 percent in March.

``Activity will continue to be soft in the near term,'' Heather Ridout, chief executive officer of the Australian Industry Group, said in an e-mailed statement. ``The July outcome reflects a decline in production, employment and new orders.''

Manufacturing accounts for 10 percent of gross domestic product and employs one-tenth of the workforce.

The manufacturing survey, which is similar to the U.S. ISM index, asked more than 200 companies about production, new orders, deliveries, inventories and employment.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net