Positive start to the new financial year for manufacturing

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) rose by 2.0 points to 53.5 in July, indicating a more convincing expansion as Australian manufacturing landed in positive territory for two consecutive months for the first time since October 2019 (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

Ai Group Chief Executive Innes Willox said, “With the encouraging lift in July, Australian manufacturing has expanded for two consecutive months for the first time since October 2019. Despite the improvement, weak spots persist. July’s expansion was driven by the two largest manufacturing sectors: the food & beverage and machinery & equipment sectors. All other sectors are reporting difficult trading conditions due to the impact of COVID-19 and the underlying weakness of residential construction.

Manufacturing employment, production and new orders were all higher than in June although the pace of improvement in new orders slowed over the month. Unfortunately, exports were again weaker in July. The performance of the sector was in part due to stimulus measures including JobKeeper and the extension of the instant asset write-off arrangements which boosted sales and orders in the machinery and equipment sector.

Against the positive signs from the manufacturing sector, the winding down of stimulus from September, the impact of the Melbourne lockdown and the severity of the outbreak, as well as tougher border restrictions are likely to weigh on the sector in coming months,” Willox said.