June’s PMI: A mixed month for manufacturers

Numbers released by the Australian Industry Group (Ai Group) as part of their ongoing tracking of the manufacturing sector indicate that June was a mixed month for the sector.

The Australian Performance of Manufacturing Index (PMI) While production and exports expanded, other activity indexes contracted, with employment down by 5.5 points, new orders down 2.5 points, supplier deliveries by 6.5 points and finished stocks down 6.8 points. The results for sales remained somewhat stable at 0.8 points.

Overall, the Australian PMI index fell by 3.3 points to 49.4, with a score below 50 indicating a contraction in the conditions for the sector. This was the lowest result since August 2016.

Ai Group chief executive, Innes Willox, put the statistics down to macro effects on the sector.

“While the pace of growth has eased over the past year, the combination of the housing construction downturn, a slowing in engineering construction, continuing drought conditions and slow income growth across the broader economy caught up with the manufacturing sector and dragged it into negative territory as the financial year drew to a close,” said Willox.

Food and beverages, building materials, wood and furniture were the best performing industries, while metals, textiles, clothing, footwear, paper and printing products contracted.

The lower Australian dollar had a pronounced effect on machinery and equipment manufacturers who found costs increased for high-value imported components.

Willox noted that sell prices eased as input costs and wages increased, leading to intensified pressure on margins.

With much speculation at a national level of the health of the Australian economy and the appropriate solutions to drive growth for business and industry, Willox noted that macro-economic changes could improve the outlook for manufacturers.

“Manufacturers will be hoping that the combination of lower interest rates and personal income tax cuts translate into higher domestic demand over coming months,” said Willox.