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Manufacturing recovery interrupted by widespread lockdowns in August 2021

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) dropped by 9.2 points to 51.6 in August, indicating weak expansion across manufacturing and effectively pausing a solid period of recovery throughout 2021 (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

Ai Group Chief Executive Innes Willox said: “August saw a steep retreat from the healthy expansion in manufacturing performance that has characterised most of this year. Lockdowns across the country, particularly in NSW and Victoria were the major detractor from performance with ongoing strength outside of these states sufficiently strong to maintain the national performance in positive territory (although by a slim margin). The building materials and metal product sectors saw the steepest declines due in large part to the impacts of lockdown measures on the construction sector. The food & beverage and chemicals product sectors continued to grow strongly while the machinery & equipment sector barely held onto recent gains. Employment grew slightly across the manufacturing sector as manufacturers built up stocks rather than cut back on production. Looking forward, there was positive news in the further growth in new orders in August and the easing of restrictions on construction will go some way to rebuilding confidence or at least hope among its suppliers,” Mr Willox said.

Australian PMI®: Key Findings for August 2021

  • Of the six manufacturing sectors in the Australian PMI® only food and beverages (up 1.7 points to 56.5) expanded at a faster pace in August (seasonally adjusted). The related sectors of chemicals (down 8.5 points to 56.4) and TCF, paper & printing (down 24.4 points to 53.3) also expanded, albeit at a slower rate. Machinery & equipment manufacturing stalled (down 11.3 points to 50.4) while metal products (down 16.2 points to 45.5) and building materials manufacturing (down 15.8 points to 42.4) contracted due to restricted manufacturing and construction activity in NSW and Victoria.
  • The activity indices in the Australian PMI® indicate that in August, average sales (down 11.8 points to 49.9) and production (down 11.6 points to 50.2) levels paused but exports (down 8.5 points to 45.1) and deliveries from suppliers (down 18.3 points to 41.3) both contracted. New orders (down 5.4 points to 57.1) and inventories (down 0.1 point to 55.0) continued to expand, suggesting that sales are being delayed.
  • The input prices index remained elevated in August, but eased from its record high in July (down 3.3 points to 81.3). Manufacturers continue to report high freight costs. The selling prices index also eased (down 3.0 points to 61.7) but remains well above its long-term average (48.7 points), suggesting that more manufacturers are passing on some of their costs increases to customers.
  • The average wages index slowed in August (down 6.7 points to 62.4) in the wake of a large rise in July, which is the month in which most manufacturing sector wage rises typically occur.

Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI® reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Australian PMI® results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI® uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. The Australian PMI® commenced in 1992. More information about the history and methodology of the Australian PMI® is available online.

Source: Ai Group

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