Australian manufacturing data has been released in the morning hours today and the data looked a bit on the weaker side. This is the 10th straight month in which this data has been weak. Many expected this data to come in weak but the data was weaker than anticipated.

The Australian Industry Group, officially said that they had recorded a reading of 44.3 in the past month of the previous fiscal year. This data is well below 50 and analysts feared that the markets would take it negatively and will start to drift down. But, instead of going down, the Australian markets have surprised by moving up more than 1 percent in early trade.

The Australian markets are digesting all the bad news and any small good news is being cheered by the markets. 4600 level is acting as a great support and that will help the markets to stay above it.

Coming to the manufacturing data, most of the sub sectors in the manufacturing sector showed weakness. This clearly shows that the problems in this sector are not a single sub-sector issue. All the sub sectors are recording weakness in their growth.

Innes Willox, the Ai Group\’s chief executive, said, “Forward orders continue to track weakly suggesting demand has not yet turned the corner. The recent rate cuts by the Reserve Bank are yet to offset the range of factors adversely impacting the industry and further reductions are likely to be needed over the next few months.”

All the sub sectors growth came in below 50 and that is making some of the investors worry about the manufacturing sector and the way it will pan out in the coming fiscal year. Yesterday, there was a good movement in the global markets as well as the Australian indices on the back of the fiscal deal approval by the Congress.

Some analysts argue that this movement in the ASX is on the back of this news and the strength of this news is more than the weakness in the manufacturing data. Willox also added, “A high Australian dollar and higher costs, particularly for energy due to the impacts of the carbon tax and, in some states, the costs associated with investment in network infrastructure, have all taken their toll on margins and activity.”

This down move in the Australian dollar in the recent past will put more pressure on the margins and the economy will weaken citing weak quarter on quarter growth by the Australian companies.

In the past one year, we have seen majority of the sectors in Australia posting some good numbers and a turn around in growth. But, the manufacturing data in this part of the globe has been weak and this trend has been continuing for the past 10 months.

Analysts worry that there may be a slow down in the economy if this continues for quite a while. But, the markets seem to ignore this news and are moving from strength to strength, up by around 1.2 percent, last time we checked.

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Category: Finances
Keywords: Dow Jones, Manufacturing Data, Fiscal cliff