Manufacturing picked up slightly in February following an unseasonably slow summer but property price falls and high energy costs are keeping businesses concerned, an industry survey suggests.
The Australian Industry Group's Performance of Manufacturing Index released on Friday indicates there was expansion in the food and beverages sub-sector last month but a worsening trend contraction in two areas relating to building.
"The drop off in residential construction activity is flowing along supply chains with both the metal products and the building, wood products and furniture sub-sectors contracting," Ai Group chief executive Innes Willox said.
Australian Bureau of Statistics data released on Wednesday pointed to steeper than expected falls in home building work in the December quarter.
A sharp drop in demand for building-related products and furnishings since the middle of 2018 and lower forward orders for the sector point to a slower year ahead, the AiG report said.
"Looking over the longer term, there are major concerns about the high cost of electricity and gas, particularly in more energy-intensive industries," Mr Willox said.
An Ai Group statement said the survey data's selling prices index rose in February, indicating that prices for some manufactured goods are going up again slightly following price falls in December and flat numbers in January.
But businesses indicated that higher costs "are difficult to pass on to customers," and they were being squeezed as "wage and input costs continue to grow at a stronger pace than selling prices".
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