Australian manufacturing hits a speed hump as output and export orders slip

Australian manufacturing hits a speed hump as output and export orders slip
Australian manufacturing hits a speed hump as output and export orders slip

Australian manufacturers appear to have hit a speed hump, with activity slowing as factories struggle to attract new sales.

While the CBA Manufacturing Purchasing Managers Index (PMI) showed activity expanded in July, it was at a noticeably slower pace than previous months.

The index read came in at 52.4, down from 55 in June — with 50 being the breakeven level between expansion and contraction.

It was the weakest reading the survey has recorded since May 2016.

CBA chief economist Michael Blythe said the PMI "had returned to earth with a thud" after a spike in June.

"Manufacturing activity has proved volatile of late, [but] the downside looks limited with firms remaining very positive on the outlook for the year ahead," Mr Blythe said.

Export orders down, prices up

Much of the downturn was the result of weaker factory output and lower demand for new orders, particularly among export-focussed industries.

The survey also pointed to strong inflationary pressures, which in turn has motivated businesses to raise prices.

"Demand appears strong enough to allow a relatively rapid lift in prices charged," Mr Blythe said..

Business confidence remained high, although measures for employment growth eased.

Mr Blythe said the fall in export orders was unlikely to be related to mounting tensions in global trade.

"The negative impact of a trade war would be magnified by any weakness in business confidence. That weakness is not evident at this early stage," he said.

Photo Factory activity slowed in July as prices rose and new orders fell.

Supplied: CBA, IHS Markitt

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