Signs of manufacturing slowing in August

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) dropped 3.2 points to 49.3 in August, indicating a slight contraction (readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction). This is the first time the index has contracted since January 2022 following the Omicron outbreak.

Innes Willox, chief executive of Ai Group the national employer association said, “The Ai Group Australian PMI for August points to the end of the recent expansion of manufacturing activity. Production, employment and sales were all down in August and most manufacturing sectors reported lower performance in the month. The chemicals subsector expanded as did the diverse textiles, clothing, footwear, paper & printing subsector. Prices and wages continued to push higher and with the Reserve Bank seeking to ease these pressures by raising interest rates, further slowing in manufacturing looks increasingly likely over the coming months.”

Manufacturing fell short of growth in August for the first time in six months. Activity was lower in all subsectors other than chemicals and the diverse textiles, clothing, footwear, paper & printing subsector.

Labour challenges and supply chain disruption continue to plague manufacturing as in previous months. While new orders continued to grow in August the pace of growth eased and sales dropped in August relative to July, indicating a negative direction for demand.

Most manufacturing activity indicators contracted at an accelerating rate in August. Despite this wages rose steeply in August pointing to labour shortage pressures.

Manufacturing exports declined further; businesses reported volatile export demand.