The January Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) fell to its lowest point since 2015. Seasonally adjusted it dropped 2.9 points to 45.4 points in January. It also contracted at a faster pace in January than December, Ai Group said.
Ai Group CEO Innes Willox said: “Australia’s manufacturers are seeing a disappointing start to this new year and new decade. Activity, new orders, deliveries, sales and exports all slowed in the last months of 2019 and this has continued into January, affecting all segments of manufacturing.”
Looking ahead the production, new orders and deliveries activity indices suggest that weak business conditions for Australian manufacturers will continue for some months into 2020.
“The combined impact of global trade disruptions, slow local consumption, the residential construction downturn, drought and the ongoing bushfire crisis are taking their toll on local production this summer. Drought and fire continue to disrupt activity, reduce demand and push up prices for key inputs for food processors and other manufacturing sectors,” Willox said.
The food, beverages & tobacco sector produced $25.8 billion in real value-added output in the year to Q3 2019 – 25 per cent of manufacturing real value-added output.
As at November 2019, it employed 237,000 people or 27 per cent of manufacturing employment.
The index for food & beverages decreased by 0.5 points to 60.3 points, indicating a decelerating rate of expansion in January, which is on trend. But overall, the sector has been expanding since 2012 and remains above its own long-run average (53.5 points since 2003).
Ai Group said beverage manufacturers reported buoyant conditions, but some food manufacturers noted rising raw input prices because of the drought, bushfires and low dollar.
Willox said: “Already in January, we are facing yet another new threat of global disruption and disaster, in the form of the coronavirus emerging from China. China and its Asian neighbours are key export markets for Australian food, beverages and other manufactured goods.
“The measures announced in response to the virus to date are timely and necessary, but they will likely dent demand for Australian manufactured exports in the short term. The resilience and flexibility of Australian manufacturers provides some comfort that they will be able to bounce back quickly, once trading conditions return to a more normal pattern of activity.”
