Activity across the Australian manufacturing sector stabilised in July, after contracting in June, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) recovering 6.2 points to 50.4 after dropping 8.1 points in June (readings above 50 indicate expansion in activity, the distance from 50 indicating the strength of the increase).
After only the manufacturing exports sub-index managed to stay marginally above 50 points in June, four of the seven activity sub-indexes expanded in July. Manufacturing sales (up 12.9 points to 53.9) expanded for the first time in 14 months, while production (up 10.6 points to 54.2) and supplier deliveries (up 6.3 points to 50.6) reversed sharp declines in June to return to expansion. New orders (up 7.6 points to 49.8) also recovered lost ground to approach stability, but stock levels (down 1.7 points to 47.9) and manufacturing employment (up 2.6 points to 47.5) remained in negative territory.
The exports sub-index expanded for a third consecutive month (up 1.6 points to 51.8), reflecting the lower Australian dollar. The input prices sub-index was unchanged in July (up 0.2 points to 63.1), while the wages sub-index rose by 7.4 points to 64.5, reflecting the 2.5% increase in the national minimum wage and award wage rates from July 1. Manufacturing selling prices rose 4.9 points to 52.3 after three months of contraction, making only a small inroad into the intense downward pricing pressures of weak local demand.
Three of the eight manufacturing sub-sectors expanded in July, led by food, beverages & tobacco (down 1.7 points to 58.9) for a 14th month. The relatively small wood & paper products sub-sector (up 4.4 points to 68.2) expanded for a fifth month, while petroleum, coal, chemical & rubber products (up 2.2 points to 50.7) returned to expansion after a brief contraction in June. Printing & recorded media was stable at 50.0 points after four months of expansion.
Textiles, clothing & furniture (down 3.2 points to 49.3) returned to contraction after a brief expansion in June. The machinery and equipment (down 0.6 points to 40.5), metal products (up 3.3 points to 43.0), and non-metallic mineral products (down 2.5 points to 44.0) sub-sectors continued to contract.
“The lower dollar was an important positive factor in the July turnaround in manufacturing performance which saw another lift in exports,” said Ai Group Chief Executive, Innes Willox. “Healthy contributions from the food and beverages sector and industry segments linked to residential construction offset continued weakness in other areas including the important machinery and equipment sector. Machinery and equipment is suffering from the drop in demand from mining-related construction and the ongoing wind-down of automotive assembly.”