From the AIG, the one month manufacturing expansion is over:
Activity across the manufacturing industry fell sharply in June, following a brief expansion in May. The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) dropped by 8.1 points to 44.2 points this month (readings above 50 points indicate expansion), the lowest reading since July 2013 (seasonally adjusted).
- The Australian PMI® typically ‘leads’ ABS data for manufacturing output by around 3 months. Recent results from the Australian PMI® suggest output growth in manufacturing (measured as ‘value added’ by the ABS) is likely to have been flat in Q2 2015, after achieving small recoveries in industry-wide output in Q4 of 2014 and Q1 of 2015.
- Four of the eight manufacturing sub-sectors in the Australian PMI® expanded in June: food and beverages (for a 13th month); wood and paper (for a fourth month); textiles, clothing, footwear, furniture and other manufacturing; and printing and recorded media.
- Of the seven activity sub-indexes in the Australian PMI® , only manufacturing exports expanded (readings above 50 points) in June, albeit at a very mild pace and largely concentrated in food and beverages exports.
In contrast, manufacturing new orders, production, employment and supplier deliveries all contracted in June after a brief expansion in May. Manufacturing sales declined for a 13th month in June, signalling continued weakness in local demand. More positively, manufacturing stock levels have been broadly stable over the past two months.
- Manufacturing respondents indicated that local demand remained weak in June, despite increased residential construction activity and very low interest rates. Respondents reported that the progressive closure of local automotive assembly, which has been underway for some time, is now having a greater effect on downstream demand. Subdued consumer and business confidence, further declines in mining and other business investment in machinery and equipment, and a slow economic outlook, also continue to weigh on local demand.
That looks like a bit of a sudden freeze but given manufacturing is so marginal these days we’ll have to wait for other indicators. Full report.
