The Australian Industry Group (Ai Group) has released its November Performance of Manufacturing Index with the results showing a drop of 4.9 points to 44.7 in November.

According to the Ai Group, this indicates deteriorating conditions (as readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction).

It said this is the first month of contraction following three months of flat conditions.

The October Performance of Manufacturing Index showed an easing of 0.6 points to a broadly stable 49.6.

Ai group CEO Innes Willox said, “There are now signs of a slowdown in Australian manufacturing. Demand conditions in the market declined in November as deteriorating national and global economic conditions weighed on the industry.

“Longstanding supply-side problems, such as tight labour markets and supply chain disruptions, appear to have peaked but remain elevated. Energy prices continue to rise. Manufacturing is at risk of being squeezed between deteriorating demand conditions and persistent supply side pressures.”

Other key findings that Ai Group identified from the November index include:

• Manufacturing fell into contraction in November following three months of stability. Five of the six sectors in the Australian PMI are now in contraction, as are six of the seven activity indicators.
• Demand-side conditions have deteriorated in the face of national and global economic uncertainty. Production, new orders and sales were all significantly down in November.
• Supply-side pressures on manufacturing – tight labour markets and supply chain interruptions – appear to have peaked. But these pressures are yet to materially decline and remain well elevated on long-run trend.

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