Ai Group’s Australian Performance of Manufacturing Index eased slightly in July but remained in “strong expansionary territory” after its 10th consecutive month of growth. The employers group expressed concern over tough restrictions in Sydney local government areas where there's a concentration of manufacturing sites and workers.
"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,” said Ai Group chief executive Innes Willox.
“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.”
The Index showed production expanded in most states and territories but was lower in New South Wales due to lockdowns in Sydney and selected NSW regional areas. High prices for various metals, raw materials and imported components continue to create difficulties for many manufacturers. Expansions in finished stocks, new orders and exports moderated in July. Some exporters reported difficulty finding empty shipping containers and/or booking shipping space to export their products.
The machinery & equipment, chemicals and metal products sectors all hit record highs in July with strong demand for manufactured products that supply firms in construction, mining, agricultural and transport. Some respondents said more customers are looking for certainty and reliability in supply chains and opting for Australian suppliers.
The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment.
