Food and beverages a bright spot in a gloomy June for manufacturing

The Australian Industry Group has released its Performance of Manufacturing Index (PMI) for June, which revealed that the food, beverages and tobacco subsector has expanded for the 13th consecutive month.

Food and beverages exports continue to benefit from a lower Australian dollar, while local demand remains solid. This subsector is the single largest manufacturer, accounting for around 25% of all output and employment. It has recorded the strongest and most consistent growth trend among all manufacturing subsectors since 2013. In June, the food, beverages and tobacco subsector’s index increased by 0.7 points to 60.5 points (three-month moving averages). Readings above 50 points indicate expansion.

Food and beverages was one of four (from a total of eight) manufacturing subsectors in the Australian PMI that expanded in June. The others are wood and paper (for a fourth month); textiles, clothing, footwear, furniture and other manufacturing; and printing and recorded media.

Of the seven activity subindexes (comprising sales, manufacturing exports, new orders, production, employment, supplier deliveries and stocks) in the Australian PMI, only manufacturing exports expanded in June, albeit at a very mild pace and largely concentrated in food and beverages exports.  

Overall, activity across the Australian manufacturing sector fell sharply in June. The PMI recorded a result of 44.2, down from May’s 52.3. The previous result was a break from five previous months of negative results.

Ai Group Chief Executive Innes Willox said: “While the lower dollar continues to support exports, local demand remains generally weak, apart from a few bright spots in food and beverages and housing-related manufactures. In particular, the progressive closure of local automotive assembly is now having a greater impact on downstream demand. Further declines in mining and other business investment in machinery and equipment, and a still subdued economic outlook, are weighing more heavily on the manufacturing sector than any positive effects of the federal Budget and recent interest rate cuts.”