MANUFACTURING EDGES BACK FROM THE BRINK

Australian manufacturing rallied in July, with the Ai Group’s Performance of Manufacturing Index edging back into positive territory at 51.3 points, following June’s mild contraction. The improved performance comes despite sharp falls in both sales and production, but backed by improvements in new orders, exports and supplier deliveries.

The ever-growing food and beverage sector continues to lead the growth (albeit slightly down to 59.2) and the building materials sector continues to defy the go-slow in residential construction with a new high of 63.7. On the down side, the metals sector continues its serious contraction at 35.4 and the machinery and equipment sector is still below par at 48.8.

Some of the underlying figures do seem to indicate that the industry is still struggling to stay ahead. Although the rate of growth of input prices is easing, at 66.3 that is still a worryingly high figure when compared with a selling price index that is becalmed at 49.2.

Meanwhile, wage growth is easing at 56.9, in spite of the 3 per cent increase in the minimum wage, which came into effect at the start of the month.

Ai Group Chief Executive Innes Willox was optimistic in announcing the results, saying: “While production fell, export sales were stronger partly due to the downward drift in exchange rates over the first half of 2019 and partly due to strong overseas demand for food, beverages, pharmaceutical and cosmetic products.

“Pressures on manufacturers’ margins continued in July in the face of weak domestic sales and selling prices even though the pace of increases in wages and other input costs eased. In encouraging pointers for the months ahead, both new orders and employment expanded in July,” he concluded.