Coronavirus slams the brakes on Australian manufacturing

Coronavirus slams the brakes on Australian manufacturing

A key indicator for the health of the Australian manufacturing industry has seen better days as coronavirus Covid-19 impacts almost every major sector.

The Australian Performance of Manufacturing Index (Australian PMI) fell 1.1 points to 44.3 points in February, the first full month of the year to experience the full force of the Covid-19 outbreak.

Results below 50 points on the Australian PMI indicate contraction with lower results indicating a faster contraction in the month.

Today's announcement from the Australian PMI marked four consecutive months of contraction in the Australian manufacturing sector. The last time this occurred was in 2014, and today's result is the lowest monthly result in almost five years.

All manufacturing sectors deteriorated in February, and all sectors except for food & beverages recorded a contraction.

Respondents to the Australian PMI said travel restrictions in response to Covid-19 were denting exports of Australian manufactured goods, particularly consumable items into China.

'Heavy' manufacturing sectors like equipment, machinery and metals noticed supply chain disruptions in February due to factory and freight closures in China.

Locally, the effects of drought, weak demand from the construction sector and the general slow place of the Australian economy were all named high-priority concerns for the manufacturing sector at large.

According to the index, the food & beverages sector remained positive in February largely due to a strong Christmas period.

However, on a seasonally adjusted basis, the Australian PMI says even this sector fell into contraction with respondents to the survey noting slow local sales and slower exports because of Covid-19.

The forecast is not looking bright either; the new orders index in the Australian PMI plunged to its lowest level since July 2013, suggesting a very sharp deterioration in new orders and weaker demand conditions ahead for manufacturers. 

According to Australian Industry Group chief executive Innes Willox, Covid-19 has made more of an impact than the December/January bushfires.

"The disruptive effects of the coronavirus, including on supply chains, are deepening and adding to the slowdown that has been in train since the closing months of 2019," says Willox.

"While the fallout from the bushfires was again reported as disrupting activity, fewer manufacturers identified this as a major detractor."

"The coronavirus is negatively impacting the exports of fast-moving consumable items to China and a number of businesses reported supply chain difficulties arising from factory shutdowns in China."

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