Manufacturing moves to positive territory in June according to AI Group PMI

Image by Martinelle from Pixabay

The Australian manufacturing sector has ended the month of June on a positive note as it increased 9.9 points to 51.5, a level indicating that there is expansion in the activity in the industry.

According to a report from the Australian Industry group, while the result is the largest ever monthly rise, it narrowly focused on some sub sectors. This means that the improvement is attributed to “recent depths rather than a recovery to buoyant conditions”. The sub sectors of large food and beverages, as well as new orders from food wholesale distributors brought about by easing restrictions in trading, were mostly credited for the improvement. Meanwhile manufacturers of locally made metal products and building materials to the construction industry reported a sharp reduction in new orders.

“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. The machinery & equipment sector enjoyed a spike in sales associated with end-of-financial year buyers taking advantage of the expanded instant asset write-off provisions. The building materials, metals and chemicals sectors remained in contraction,” said AI Group Chief Executive Innes Willox.

“Across the manufacturing sector, production lifted and encouragingly new orders rebounded strongly following sharp contractions in April and May. Employment on the other hand merely stabilised after the contractions of the previous two months. Wage levels also levelled off after the very rare fall recorded in May. We are still well short of a recovery even with the quantity of fiscal stimulus in the economy and 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,” Mr Willox said.

Among the seven activity indices production, sales and new orders are the ones that recorded expansions while employment, supplier deliveries, finished stocks and exports remained in contraction.

Read the full report on the Australian PMI for the month of June here.

The report from AI Group follows the PMI released by the Commonwealth Bank of Australia released late in June which showed the industry still in contraction although with some improvement.

CBA Head of Australian Economics, Gareth Aird said: “The June results indicate we are now past the lowest point in economic activity. Overall conditions are still very soft, but there were some encouraging signs about further improvements still to come.”

Image by Martinelle from Pixabay