Australia’s manufacturing sector has seen signs of stabilisation in July but remained in a downturn, according to the latest Purchasing Manager’s Index (PMI) report from Judo Bank.
The headline seasonally adjusted Judo Bank Australia Manufacturing PMI posted 49.6 in July, up from June’s 48.2. Although showing an easing to the softest extent, the latest result is still below the neutral level at 50.0 and marks a fifth monthly decline in manufacturing activity in 2023.
The slight increase in business activity in July follows a shallower contraction in new orders, along with the clearance of backlogged work as a result of greater staffing levels.
Manufacturing output saw little change in July as the sector sees stabilisation in demand as the sector experiences slower reductions in both overall new orders and new business from abroad.
However, the decline in new orders continued to drag down purchasing activity among manufacturers. Businesses purchased a lower volume of inputs for the 10th month in a row, but the rate of contraction decelerated in line with order book volumes, Judo Bank said in its report.
“Export orders rose slightly in July but remain below 50, where it has been since December 2022. A cyclical slowdown in global manufacturing activity is weighing on the Australian industry alongside the domestic backdrop. Demand for consumer goods and disruptions to the construction industry have also impacted Australian manufacturing activity in 2023,” said Warren Hogan, chief economic advisor at Judo Bank.
Businesses reduced their purchasing activity and inventory holdings at slower rates in July, indicating an improvement in business confidence. Firms have expressed hopes for better sales to push output growth in the coming 12 months, but the level of business confidence remained well below the series average.
“The trajectory of Australian manufacturing activity is not clear. The improvement in activity indicators in July reduces the risk that the sector is headed for recession. Yet there are few signs of a cyclical upswing for manufacturing,” Hogan said.
