Australian manufacturing recovery slows

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) eased by 0.4 points to 51.2 in September, indicating a weaker rate of expansion across manufacturing and effectively stalling a solid period of recovery since late 2020 (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

Contractions in the machinery & equipment and TCF, paper and printing sectors, and a flat performance in the food and beverages sector failed to offset a return to growth in the building and metal products sectors while the chemicals sector continued to expand although at a more modest pace in September. Contractions were concentrated in the south-east corner of the country where outbreaks and lockdowns have been more severe.

Ai Group chief executive Innes Willox said, “The recovery in the manufacturing sector over the past year all-but-stalled in September as the impacts of lockdowns and border closures constrained activity in the two largest states. While sales and employment were both lower in September, there are bright spots on the horizon with new orders continuing to expand (although modestly) and production and finished stocks both rising at a faster pace than in August. Manufacturers are hoping that the prospect of restrictions being wound back will see a strong lift in performance over coming months.”

Of the six manufacturing sectors in the Australian PMI, metal products (up 8.7 points to 54.2), chemicals (down 2.2 points to 54.2) and building materials (up 8.9 points to 51.3) expanded in September, partly due to eased restrictions of construction activity in NSW. Food and beverages stalled (down 6.0 points to 50.5), while machinery and equipment (down 2.0 points to 48.4) and TCF, paper and printing (down 6.4 points to 46.9) slid into contraction.

Three of the seven activity indices in the Australian PMI fell in September with the largest falls in the employment (down 4.3 points to 47.1) and new orders indexes. However, new orders do remain positive (down 5.1 points to 52.0), which augurs well for future growth after lockdowns.