Automotive closure fails to slow manufacturing growth

economy

October marked a second year of growth in the Australian manufacturing industry, despite the closure of the automotive assembly sector in South Australia.

Six of the eight manufacturing sub-sectors expanded last month, according to results from the Australian Performance of Manufacturing Index (PMI).

Growth was led by the non-metallic mineral products sector, which stayed at a record high of 72.2 points in October, off the back of strong demand for building-related products.

Food and beverages also continued to perform well (up 0.9 points to 57.1 points) while the end of automotive assembly in Australia was reflected in lower results – and an absolute contraction – in the Australian PMI in South Australia.

“Manufacturing entered its second year of consecutive growth in October with sales, employment and forward orders expanding in the month despite some soft patches in exports and production,” said Australian Industry (Ai) Group CEO Innes Willox.

Read: The $101b industry: Which manufacturers are exporting the most?

Export growth stalled in October – possibly due to the higher Australian dollar in the third quarter – but the recently lower dollar, which has moved back to around 75 US cents in recent weeks, is likely to see a renewed surge in export activity towards the end of the year.

While October marked the final, historic end of automotive assembly in Australia, conditions appeared to be relatively buoyant, if a touch slower, for manufacturers outside of the automotive sub-sector.

“Positive sources of demand for Australian building materials, machinery and equipment include apartment and infrastructure construction; defence, mining and agricultural equipment; renewables and utilities projects,” Willox said.

“Manufacturers from all sectors continue to report that higher input costs for electricity and gas (and also for selected raw inputs such as milk and butter) are biting into margins.”