Good news for the Manufacturing Industry but the drought pushes input costs higher

According to news reports this week, activity levels across Australia’s manufacturing industry has rebounded positively in August.

The Australian Industry Group’s Performance of Manufacturing Index (PMI) reported a rise to 56.7 points last month after seasonal adjustments, up 4.7 points on the level reported in July.  This is a particularly strong performance amid the political chaos of recent weeks, as well as worsening drought conditions across much of the Eastern states.

In fact, the PMI report showed activity levels have now improved for 23 consecutive months, the longest stretch of continuous growth since 2005.  As well as this, new orders and new export orders have increased strongly, as have employment levels.

This is a positive story and one that somewhat confounds in the current climate.  One concern the data revealed is that Manufacturers are beginning to face margin pressures as input costs rose faster than selling prices.  This likely to continue as the drought shows little sign of abating and the impact is beginning to flow up the supply chain. Businesses should be cautious operating amidst the balancing act.

The Ai Group will release more data around Australia’s services and construction sectors in the coming days.