Australian PMI: Manufacturing sector suffers impact of lockdowns in August

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Image by Alex Freeman from Pixabay

Stage 4 restrictions in Victoria due to COVID-19 have slowed down the manufacturing sector’s recovery in August as the Australian Industry Group’s Australian Performance of Manufacturing Index (Australian PMI®) fell by 4.2 points to 49.3. 

Ai Group Chief Executive Innes Willox said: “While the manufacturing sector held on to recent gains with activity broadly stable in August, manufacturers from Victoria, which accounts for about 25 percent of the national economy, sunk back into negative territory in the month in line with the introduction of severe restrictions on businesses and as local consumer demand was hit hard by the stay-at-home orders.”

“Looking across the country, the pace of growth picked up in the food & beverage, machinery & equipment and textiles, clothing, footwear, paper & printing sectors. Metal products manufacturers saw a mild easing of activity while both the chemicals and building products sectors lost further ground over the month.”

“Employment was broadly stable and the export index showed a marked improvement pointing to a recovery in at least some markets overseas. The further fall in new orders cast a major shadow over conditions in coming months and further stimulus is likely to be needed to help accelerate the recovery of consumer and business spending,” Mr Willox said in a statement. 

According to the report, three of the six manufacturing sectors expanded and three contracted in August. The manufacturing sectors that mainly produce consumable products (food & beverages and the TCF, paper & printing product sectors) expanded as well as the large machinery & equipment sector. Contraction was evident in the more traditional ‘heavy industrial’ manufacturing sectors.

Six of the seven activity indices deteriorated in August compared to July. Production (down 3.0 points to 53.4) and exports (up 10.8 points to 52.2) expanded, while sales (down 5.6 points to 46.6), new orders (down 6.1 points to 46.6) and finished stocks (down 6.9 points to 44.9) contracted. The indices for employment (down 3.2 points to 50.2) and supplier deliveries (down 2.2 points to 49.6) fell but remained indicative of broadly stable conditions.

On August 3 Victorian Premier Daniel Andrews announced the temporary closure of many businesses in the state for at least six weeks, with the manufacturing sector among the industries affected.

Businesses such as textile, furniture and fabricated metal manufacturing were shut down for on-site work, while food and beverage production as well as medical equipment and PPE manufacturers were allowed to remain open for on-site work provided they operate under a COVID Safe plan.

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