Manufacturers to tighten their belts in 2008: Economy round-up

The less certain global economic outlook for the year ahead could see manufacturers’ export income decline in 2008, according to a new Australian Industry Group survey released today.

Manufacturers expect export volumes to grow at 7.5% in 2008, well down from 13.7% in 2007.

But the strong domestic economy is expected to compensate for the international weakness, with sales expected to rise by 7.2% in 2008, up from 6.9% 2006-07.

“With global financial markets experiencing substantial turbulence and continued talk about further interest rate rises, manufacturers are wisely taking a cautious approach and building up a safety margin in case domestic demand conditions weaken,” AiG chief executive Heather Ridout says.

Mixed signals from economic data released today means there is still a fair bit of uncertainty about what kind of figure we can expect when the consumer price index– the crucial measure the Reserve Bank considers in making its decision on interest rates – is released on Wednesday.

The producer price index, a measure of materials inputs and production in the commodities and manufacturing sectors, increased by 0.6%, below market expectations of a 1.1% rise.

But on the other side of the ledger building activity in the September quarter of 2007 grew, with the value of work done increasing by 2% thanks entirely to 5.5% growth in non-residential construction.

And lending levels were generally higher in November with a 0.3% decline in personal lending more than offset by 8.1% rise in commercial lending, 2% rise in housing finance and a 1.9% rise in leasing finance.