The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) slumped 7.0 points to 51.3 in November, indicating slower growth in the manufacturing sector.

This is the lowest result since October 2017 but still extends the index’s period of uninterrupted growth to 26 months – the longest run of recovery or expansion since 2005 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase). Five of the seven activity indexes expanded in November, while employment was broadly stable (down 3.2 points to 49.4). The new orders index fell into contraction (down 10.1 points to 48.7) for the first time since September 2016, suggesting tougher conditions may be ahead for manufacturers in some sectors.

“The recovery in the Australian manufacturing sector slowed in November, with the Australian PMI falling to its lowest level in a little over a year,” said Ai Group Chief Executive Innes Willox. “Despite this slowing, manufacturing extended its run of uninterrupted growth to 26 months. Food & beverages manufacturers reported higher production in the lead up to Christmas and respondents in other sectors reported high levels of activity related to infrastructure and construction projects, particularly in Victoria.”

Five of the eight manufacturing sectors expanded in November (according to trend data), with the remaining three broadly stable. Growth was led by the printing & recorded media (up 4.6 points to 67.6), food & beverages (down 0.9 points to 57.9) and non-metallic minerals (mainly building and construction-related products – down 2.0 points to 74.9) sectors.

The input prices index rose 2.2 points to 75.0 in November, with food & beverages manufacturers reporting higher prices for raw agricultural inputs and high energy input costs continuing across other sectors. The wages sub-index fell back further from September’s record high, dropping 8.2 points to 58.8. The manufacturing selling price sub-index dropped to its lowest level of 2018, falling 6.7 points to 50.4 in November. This indicates very modest price increases for manufacturing customers, with the upward trend evident throughout this year appearing to have halted.

“While it is too early to say that winter is coming for the sector, there are clouds on the horizon with new orders falling into contraction,” Willox added. “Drought conditions in New South Wales and Queensland are now having an adverse impact on input costs and sales for some manufacturers and uncertainty over the direction of energy prices and policy is weighing heavily on the more energy-intensive parts of the sector.”