Ai Group’s Australian Performance of Manufacturing Index shows the textiles, clothing, footwear, paper and printing sector eased 0.3 points to 59.3 points in July, with overall manufacturing remaining in strong expansionary territory at 60.8 points with an easing of 2.4 points.
Ai Group says whilst the figures indicate a slower growth rate from June’s record expansion, readings above 50 points indicate expansion activity.
Respondents in the TCF, paper and printing products sector, which employs 84,000 Australians, reported uncertainty due to widespread lockdowns across the country which have led to order cancellations and postponements.
Ai Group CEO Innes Willox pointed to the tough lockdown in certain parts of Sydney as having an effect on further easing of manufacturing in the months ahead.
“The slower pace of the manufacturing upswing in July and the slower pace of growth in new orders suggest further easing in the months ahead. A significant headwind for the sector is that Sydney’s toughest restrictions relate to local government areas where there is a concentration of manufacturing sites and the manufacturing workforce,” Willox said.
“We expect the dampening impacts of these restrictions will flow along supply chains across the country with some offset from the easing of Victorian restrictions.”
The report also points to higher input costs and wage rises as factors impacting higher selling prices.
“While COVID-19 outbreaks and associated restrictions in some states undoubtedly dampened the upswing in activity and shook confidence, the manufacturing sector recorded another strong month of expansion in July. Production, employment, and sales of manufactured goods all grew at a faster pace than in June. Performance improved at record rates in the machinery & equipment, chemicals, and metal products sectors,” he said.
“Less positively, input prices escalated at a record rate and the pace of wages growth picked up on both trend and seasonally adjusted measures. These cost pressures were reflected in higher selling prices.”
Manufacturing concerns
The report said production expanded in most states and territories but was lower in NSW due to Sydney lockdowns and selected NSW regional areas.
“High prices for various metals, raw materials and imported components continue to create difficulties for many manufacturers. While some respondents report higher demand for Australian made products due to difficulty sourcing materials from overseas, others have shifted production back to their overseas facilities due to an inability to source suitable skilled labour and/or inputs and materials in Australia,” it found.
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