Australia manufacturing PMI sees 3-year record high amid shipping delays

Image Credit: Clayton Cardinalli from Unsplash

While supply chain delays and shipping problems continue to plague the industry, the Australian marketing economy is sporting a 3-year record high in terms of IHS Markit Manufacturing Purchasing Managers’ Index (PMI®) growth from 2018 to 2020.

According to the IHS Markit PMI® press release, the three-year growth in Australian manufacturing is likely triggered by the continuous acceleration of output, order book and employment growth.

Production and employment returned to positive territory after a significant bounce back in late 2020. IHS Markit Chief Economist, Chris Williamson, describes the December recovery as “one of the strongest upturns in production since 2018.”

As a result of the upturn, the PMI® edged down from a 35-month high of 55.8 in November to a 55.7 in December. The pulldown was largely a consequence of supply chain delays which ultimately led to shortages in inputs.

Output growth saw net increases, the second-fastest recorded in nearly two years, the report adds. Order book growth acceleration also enjoyed upturns as a direct result of lockdown easing all across Australia, with new orders showing largest gains since November 2018.

Despite the overall improvement in order book inflows, the gain is largely contained within the domestic market. Export data reveals a fall in new orders — the sharpest one since August 2020 — despite rising demand in the US and EU markets. Analysts attribute this decline to worsening trade tensions with China, alongside a marked deterioration of shipping conditions.

Business confidence remains optimistic in spite of export and supply chain pressures. IHS Markit’s expectations for 2021 sits at the positive as firms hope to return to pre-COVID operations, though experts advise caution as the pandemic and ongoing trade tensions could still carry on.

“Businesses also remained optimistic about the outlook for the year ahead,” said Williamson.

“In balance, however, expectations were reined in slightly compared to November due to increased concerns that the pandemic will stretch further into 2021 than previously thought, and the possibility of escalating trade tensions,” he adds.