By Jacob Greber
Feb. 2 (Bloomberg) -- Australian manufacturing contracted for an eighth month in January as companies received fewer orders and fired workers.
The performance of manufacturing index rose 2.9 points to 36.6 from December, the Australian Industry Group and PricewaterhouseCoopers said in a report released in Canberra today. A reading below 50 signals manufacturing is shrinking.
Today’s report adds to signs Australia’s economy may follow the U.S., Europe and Japan into a recession, after expanding in the third quarter at the weakest pace in eight years. Central bank Governor Glenn Stevens will cut the benchmark interest rate tomorrow to the lowest level since the 1960s, economists forecast.
“Ongoing falls in new orders in particular highlight the challenging conditions manufacturers are facing in the early months” of this year, said Heather Ridout, chief executive officer of the Australian Industry Group.
“Businesses are working on reduced inventories, leading to lower production and consequently putting further pressure on employment.”
Manufacturing accounts for 10 percent of gross domestic product and employs one tenth of the workforce. Australia’s jobless rate rose to a two-year high of 4.5 percent in December.
Central bank policy makers will reduce the benchmark rate by one percentage point to 3.25 percent when they meet tomorrow, according to 11 of 20 economists surveyed by Bloomberg News last week. The rest expect a three-quarter point reduction.
“Business will be looking for a further significant cut in interest rates this week, Ridout said.
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
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