The pace of growth in Australian manufacturing activity slowed in June from the strong performances in April and May. The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian Purchasing Managers’ Index fell by 3.4 points to 52.9, but remained above the 50-point level separating expansion from contraction.
Growth in overall manufacturing eased, largely due to slower growth in manufacturing production, new orders, employment and supplier deliveries. Inventories rose moderately in June. Growth rates in all components of the index were moderate.
The consumer-related sectors food & beverages; textiles; and wood, wood products & furniture saw positive growth outcomes suggesting some resilience in consumer demand, though the clothing & footwear sector contracted for a sixth consecutive month.
Elsewhere, the lagged effects of stronger housing construction have seen activity in the construction materials sector accelerate in the past quarter.
Wages and input cost growth picked up in June while selling prices fell, strengthening the squeeze on manufacturers’ profit margins.
Manufactured exports rose modestly and for the fourth consecutive month.
Activity rose in Victoria, Queensland and Western Australia but fell in the other states.
Sectors
Seasonally adjusted, eight manufacturing sub-sectors saw growth in activity in June, up from seven in May. Overall, sub-sectoral outcomes were disparate in June.
Some consumer-related sectors including food & beverages; textiles; and wood, wood products & furniture appeared resilient despite the impact of higher interest rates on consumer disposable incomes. Others, notably clothing & footwear, which saw activity fall for a sixth consecutive month, were weaker.
The construction materials sector is benefitting from the lift in housing construction and saw acceleration in activity.
In other sub-sectors, solid growth was experienced in chemicals, petroleum & coal products and transport equipment, while growth was more modest in fabricated metal products and miscellaneous manufactures.
Activity fell in the paper, printing & publishing; basic metal products and machinery & equipment sectors.
Production and capacity
Seasonally adjusted, the production sub-index fell solidly, by 7.9 points to 53.5, indicating more moderate output growth in the manufacturing sector. On an unadjusted basis, the number of sectors reporting higher production rose to eight in June, up from six in May.
Growth was strongest in the construction materials; miscellaneous manufactures; transport equipment; wood, wood products & furniture; and textiles sectors. Production expanded more moderately in the food & beverages; chemicals, petroleum & coal products and fabricated metal products sectors.
The machinery & equipment; clothing & footwear; and paper, printing & publishing sectors saw solid falls in production, while the basic metal products sector saw a more moderate decline.
Capacity utilization fell modestly in June, by 0.7 percentage points to 74.3 percent.
New orders
In seasonally adjusted terms, new orders grew modestly in June. The new orders sub-index fell by 3.4 points to 51.2, though it remained above the 50 point level separating expansion from contraction.
Unadjusted, new orders increased in five of the 12 sub-sectors, up from the four recorded in May. Orders remained stable in the chemicals, petroleum & coal products sector.
The construction materials; miscellaneous manufactures; and transport equipment sectors saw the fastest rises in orders in June, while the wood, wood products & furniture and fabricated metal products sectors saw more moderate growth in orders.
The basic metal products; machinery & equipment; clothing & footwear; paper, printing & publishing; and textiles sectors all saw solid falls in new orders, while orders fell moderately in the food & beverages sector.
Employment and average wages
The seasonally adjusted employment sub-index fell by 2.6 points in June to 53.0, but reflecting the lagged impact of solid output growth in recent months, employment rose moderately. In unadjusted terms, five sectors saw employment growth in June, up from four in May, while employment was stable in the textiles sector.
The transport equipment; wood, wood products & furniture; miscellaneous manufactures; and construction materials sectors recorded the strongest employment growth in June. Employment also rose modestly in the fabricated metal products sector.
Employment fell moderately in the chemicals, petroleum & coal products; machinery & equipment; food & beverages; and paper, printing & publishing sectors and more solidly in the clothing & footwear and basic metal products sectors.
Average wages growth rose strongly in June, with the sub-index up 6.9 points to 64.9.
Finished stocks
Growth in manufacturing inventories rose moderately in June, with the seasonally adjusted sub-index up 1.7 points to 53.8. Unadjusted, seven sectors reported a rise in stocks in June, up from six in May, with the paper, printing & publishing sector seeing stable stock levels.
Inventories rose most strongly in the textiles; basic metal products; construction materials; fabricated metal products; and clothing & footwear sectors. More moderate rises were recorded in the machinery & equipment and wood, wood products & furniture sectors.
The largest falls in inventories were in chemicals, petroleum & coal products and miscellaneous manufactures, while they fell more moderately in food & beverages and transport equipment.
Deliveries, input costs and selling prices
In seasonally adjusted terms, supplier deliveries rose moderately in June, with the sub-index falling 0.3 points to 54.4.
Unadjusted, deliveries rose in six sectors, up from five in May. The sectors seeing increases were miscellaneous manufactures; wood, wood products & furniture; textiles; machinery & equipment; basic metal products; and transport equipment.
Input prices grew solidly in June, with the seasonally adjusted sub-index rising 4.6 points to 77.7.
The largest input price increases were in construction materials; machinery & equipment; miscellaneous manufactures; chemicals, petroleum & coal products; and basic metal products.
Selling prices fell, though more slowly, with the sub-index rising from 46.9 to 47.3.
The construction materials and textiles sectors saw the strongest falls in selling prices, while chemicals, petroleum & coal products and transport equipment saw the largest rises.
