Australian manufacturers saw a slowdown in sales and a rise in lead times and stock levels in the second quarter of 2025, according to the latest report from inventory management software provider Unleashed.
Average sales revenue for small and medium-sized manufacturers fell to A$573,859 in the June quarter, down 10.2 per cent from the near-record levels of the first quarter.
Despite the decline, revenue remained 27 per cent higher than the same period a year earlier. Profit margins, excluding wages, held steady at 36 per cent, showing only minor movement compared to last year.
Unleashed’s quarterly report, based on anonymised data from more than 1,400 manufacturers using its platform, highlighted that both supplier lead times and excess stock levels experienced their largest quarter-on-quarter increases since the pandemic. Lead times rose from 12 days to 25, while average overstock climbed nearly threefold to $98,000.
“While lead days and excess stock are still within a normal range, the sheer velocity of their increases does raise questions,” said Jarrod Adam, Head of Product at Unleashed. “As trade conditions become volatile for Australian manufacturers, a focus on disciplined inventory management becomes all the more important.”
Adam noted the competing pressures facing manufacturers, saying: “On one hand, the Reserve Bank has been bringing down interest rates, and there have been earnest efforts to onshore more Australian production of critical goods. On the other hand, tariffs have taken a hammer to many of our exports, and energy prices have bitten into margins.”
Certain sectors bucked the overall slowdown. Electronics manufacturing posted average revenue of $827,000, leading all subsectors, while raw material producers recorded $822,000.
Electronics makers, from handheld radio devices to IoT equipment, have benefited from an onshoring push, though their performance was still below the $968,000 reached in the March quarter.
“Australian raw material manufacturers are at the coal face of the trade wars raging overseas, so conventional wisdom would tell us they would all be feeling the pinch,” Adam said. “But digging into the numbers, our makers in this sector have defied the macro conditions and enjoyed a strong first half of the year.”
Food and beverage producers remained steady, though revenues dipped slightly from the first quarter. Independent food manufacturers averaged $516,000 in sales, while beverage producers recorded $609,000. Excess stock rose sharply for food makers, from $30,000 in the first quarter to $150,000 in the second.
Leighton Cosgrave, general manager of Radix Nutrition, said manufacturers were learning to adapt. “It’s been a tough few years and input costs have been spiking, especially around freight and labour, which has taken the shine off margins in some channels,” he said.
“Stability is finally emerging, and as we pace into the second half of the year, the usual summer confidence is allowing decisions to be made and positivity to enter the market.”
The report also showed manufacturers placed more purchase orders in Q2, rising from 177 in the first quarter to 328, the highest in two years.
