Published 02-07-2020
| Article appears in June 2020 Issue

MANUFACTURING EXPANDS IN JUNE

01-07-2020

The manufacturing sector has grown in June, according to the latest Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) figures.

Industry jumped 9.9 points to 51.5, the largest ever monthly rise and a positive result in the wake of April’s largest ever monthly fall in the PMI.

However, the boost was narrowly focused on a few sub-sectors and indicates improvement rather than recovery.

“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,” says Ai Group chief executive Innes Willox.

New orders from food wholesale distributors drove almost all of the June improvement, which was concentrated in the large food and beverages sector.

In contrast, suppliers of locally made metal products and building materials to the construction industry reported a decline in new orders, but the machinery and equipment sector enjoyed an end-of-financial-year sales spike as buyers rushed to take advantage of expanded instant asset write-off provisions.

While three of the Australian PMI’s activity indices indicated expansion in June, three indicated contraction, including a continued decline in exports.

Production rose across the manufacturing sector, and new orders rebounded from the lows of April and May.

“Employment on the other hand merely stabilised after the contractions of the previous two months,” Willox says.

Wage levels also levelled off after May’s very rare fall.

September will see Federal Government stimulus measures, including JobKeeper, wind up in what economists refer to as “the cliff”.

“We are still well short of a recovery even with the quantity of fiscal stimulus in the economy,” Willox says.

“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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