Manufacturing PMI indicates sector contraction

The performance of the Australian manufacturing sector has dipped into negative territory, with the November Australian Industry Group Performance of Manufacturing Index (Australian PMI) falling to 48.1.

The figure was 3.5 points below the October figure and was the lowest reading since August 2016.

Calling for the federal government to take greater action on lifting consumer and business spending, Ai Group chief executive Innes Willox warned that efforts until now have not translated into growth for manufacturers.

“The further fall in new orders in November is far from encouraging and is further evidence that the stimulus from interest rate reductions and the income tax cuts has not so far flowed through to consumer and business spending. The Federal Government will need to look very closely at additional stimulus options over coming months,” said Willox.

Sectors that recorded falls included the metal products, building products, and textiles, clothing, and footwear (TCF) and printing sectors, However, food and beverage and chemicals continued their run of positive figures.

Falls in new orders in previous indices led to lower activity indices across employment, and supplier deliveries, which read 47.3 points and 45.3 points, respectively. These were significant drops on previous month readings, with a 5.5 point contraction in employment and a 7 point contraction in supplier deliveries. Also falling significantly was production, which fell 5.7 points to a marginally negative level of 49.7. Exports also feel to a stable level at 49.8 points. Finished stocks was the only growing index, increasing by 4.2 points to 52.6.

Drought was once again a concern for the manufacturing sector, with suppliers to the agricultural sector and those manufacturers located in regional areas hit hard.

According to Ai Group, manufacturers can expect a slowing rate of business conditions towards the end of 2019, with only food and beverage buoyed by a seasonal increase in demand in the lead up to Christmas.