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The Australian Industry Group (Ai Group) Australian Performance of Manufacturing Index (PMI) has shown marked volatility in recent months, having its largest fall in April and its largest monthly rise in June.

Nearly all the improvement was in the food and beverage sector, expanding 0.4 points to 55.4. Five of the six manufacturing sectors in the PMI contracted in June. Some machinery and equipment (up 1.9 points to 48.2) manufacturers reported that the extension to the instant asset write-off for businesses helped to increase demand.

Ai Group CEO Innes Willox said the move into positive territory – increasing 9.9 points to 51.5 – was the largest ever rise, but narrowly focused in some sub sectors. “[It] indicates an improvement from recent depths rather than a recovery to buoyant conditions,” Willox said

The F&B sector benefited from new orders from food wholesale distributors improving with the relaxation of trading restrictions.

Willox said: “Manufacturing performance edged ahead in June largely on the back of a solid lift in the large food and beverages sector as restrictions on cafes and restaurants were eased.

“The machinery & equipment sector enjoyed a spike in sales associated with end-of-financial year buyers taking advantage of the expanded instant asset write-off provisions.

“Across the manufacturing sector, production lifted and encouragingly new orders rebounded strongly following sharp contractions in April and May.

“Employment on the other hand merely stabilised after the contractions of the previous two months. Wage levels also levelled off after the very rare fall recorded in May.

“We are still well short of a recovery even with the quantity of fiscal stimulus in the economy and the next couple of months will provide a critical test of how well the economy is positioned to cope with the withdrawal of stimulus currently scheduled for the end of September.”

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