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AiG sees ‘Signs of a slowdown’: demand drags down manufacturing

Ai Group’s Australia’s Performance of Manufacturing Index (PMI) fell 4.9 points to 44.7 in November following three months of stability. Readings below 50 points indicate contraction in activity. The Textiles, clothing, footwear, paper & printing sector “declined precipitously to be in serious contraction.” 

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 "There are now signs of a slowdown in Australian manufacturing,” according to Innes Willox, chief executive of Ai Group. “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,” Willox said. “Energy prices continue to rise. Manufacturing is at risk of being squeezed between deteriorating demand conditions and persistent supply side pressures.”

Five of the six manufacturing sectors in the Australian PMI were in contraction in November 2022, according to the survey. "Building, wood and furniture products lifted marginally into mild growth on the strength of new orders, but all other sectors were in contraction and reported deteriorating demand conditions.

"Textiles, clothing, footwear, paper & printing declined precipitously to be in serious contraction, while food & beverages and machinery & equipment fell into contraction for the first time. Metal products and the chemicals sector improved slightly on October but remain in contraction."

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  Australian PMI: Key Findings for November 2022:

 (Readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction).

 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.

Ai Group’s Australian PMI is a national composite index calculated from a mix of indices for production, new orders, deliveries, inventories and employment. 

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