Australian PMI: Manufacturing expands for tenth consecutive month despite lockdowns

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) eased by 2.4 points to 60.8 in July, remaining in strong expansionary territory but indicating a slower rate of growth from June’s record expansion (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

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Ai Group Chief Executive Innes Willox said: “While COVID-19 outbreaks and associated restrictions in some states undoubtedly dampened the upswing in activity and shook confidence, the manufacturing sector recorded another strong month of expansion in July. Production, employment, and sales of manufactured goods all grew at a faster pace than in June. Performance improved at record rates in the machinery & equipment, chemicals, and metal products sectors. Less positively, input prices escalated at a record rate and the pace of wages growth picked up on both trend and seasonally adjusted measures. These cost pressures were reflected in higher selling prices.

“The slower pace of the manufacturing upswing in July and the slower pace of growth in new orders suggest further easing in the months ahead. A significant headwind for the sector is that Sydney’s toughest restrictions relate to local government areas where there is a concentration of manufacturing sites and the manufacturing workforce. We expect the dampening impacts of these restrictions will flow along supply chains across the country with some offset from the easing of Victorian restrictions,” Mr Willox said.

Australian PMI®: Key Findings for July 2021

  • All six manufacturing sectors in the Australian PMI® expanded in July (see table below), with machinery & equipment (up 0.2 points to 65.0), metal products (up 2.2 points to 62.3) and chemicals (up 1.0 point to 66.1) all reaching record highs.
  • All seven activity indices in the Australian PMI® expanded in July, although three moderated slightly from the previous month (see table below). New orders remained in expansionary territory but fell from a record high in June (down 8.1 points to 62.5), while production expanded in most states and territories (up 1.1 points to 61.8) but was lower in NSW due to lockdowns. Some exporters noted difficulty finding empty shipping containers, with the exports index dropping 6.6 points to 53.6.
  • The input prices index increased to a record high in July (up 5.8 points to 84.6), eclipsing the previous record set in February 2008. Manufacturers’ selling prices rose for a sixth consecutive month to record the second-highest result for this index since the series began in 2007 (up 1.1 points to 64.7), suggesting that more manufacturers are passing on some of their higher input costs to customers.
  • The average wages index increased to its highest reading since 2008 (up 7.5 points to 69.1), with this large rise in July reflecting in part some reversal of wage freezes from last financial year. July also coincided with a 2.5% increase to the minimum wage which will filter through to award rates across the industry.

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Seasonally adjusted

Index this month

Change from last month

Long-run average

Trend

Index this month

Change from last month

Long-run average

Australian PMI®

60.8

-2.4

50.8

Food & beverages

61.9

0.0

53.9

Production

61.8

1.1

51.6

Machinery & Equipment

65.0

0.2

50.3

Employment

60.8

0.5

49.2

Metals products

62.3

2.2

47.5

New Orders

62.5

-8.1

51.5

Petroleum, coal, chemicals & rubber products

66.1

1.0

51.7

Supplier Deliveries

59.6

1.3

51.0

Building, wood, furniture & other

62.9

-0.6

50.1

Finished Stocks

55.1

-5.2

49.8

Textiles, clothing, footwear, paper & printing

59.3

-0.3

46.9

Exports

53.6

-6.6

50.1

Sales

61.7

2.7

49.5

Input prices

84.6

5.8

67.7

Selling prices

64.7

1.1

48.6

Average wages

69.1

7.5

58.8

Capacity utilisation (%)

79.0

-3.3

74.2

Results above 50 points indicate expansion. * All indexes for sectors in the Australian PMI® are reported in trend terms (Henderson 13-month filter).

/Public Release. This material comes from the originating organization/author(s)and may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.