Labour, supply chain disruption & energy prices constrain manufacturing: Ai Group

Ai Group has released the Australian Performance of Manufacturing Index (Australian PMI) for July 2022 with an easing across most manufacturing subsectors with labour challenges, supply chain disruptions and high energy prices the major structural constraint in manufacturing.

The textiles, clothing, footwear (TCF) and paper and printing sector eased 7.8 points to 59.4 in July but despite this remains in expansion. Readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion.

In relation to the TCF, paper and printing products sector the report found, “The index for this sector dropped by 7.8 points to be 59.4 points, easing from the recent peak in June but remaining strong (seasonally adjusted). Increased costs and wages, higher interest rates and difficulty securing raw materials were some of the challenges reported by manufacturers in the sector.”

Overall, input prices for manufacturers of all types have risen by an average of 18.5 per cent over the quarter and 6.2 per cent over the year to Q1 of 2022. At the same time, the report also found, manufacturers’ selling prices rose by an average of 4.1 per cent over the quarter and 15.1 per cent over the year to Q1 of 2022.

Private sector wages across the manufacturing industries rose by an average of 2.7 per cent over the quarter and 0.6 per cent over the year to Q1 of 2022.

Ai Group CEO Innes Willox said, “The supply and labour constraints afflicting the Australian economy are weighing heavily on the manufacturing sector. Production and employment both fell in July, as manufacturers struggle with chronic labour shortages and supply chain interruptions.

“New orders rose this month, but our manufacturers simply can’t meet this demand without more workers. Manufacturing has a key role to play in reducing the inflationary pressures facing Australia. To unlock the industry’s full potential we need to promptly address skilled labour shortages.”

The full report from Ai Group can be read here.

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