Australia’s manufacturing sector experienced further deterioration at the end of the third quarter of 2024, according to the latest Purchasing Managers’ Index (PMI) data from Judo Bank.
The PMI for September dropped to 46.7, down from 48.5 in August, marking the eighth consecutive month of declining manufacturing conditions and the sharpest decline since May 2020.
The downturn was primarily driven by a significant drop in new sales. Incoming new orders for manufactured goods fell at the fastest rate recorded outside of the pandemic, largely due to elevated interest rates and softening market conditions.
Export orders also declined significantly amid worsening foreign demand.
As a result, manufacturing output contracted sharply, and levels of unfinished work decreased. Consequently, manufacturers reduced staffing levels in response to diminished workloads. Purchasing activity also declined in line with the reduction in production and incoming orders, leading to a notable shrinkage of input stocks—the second-fastest rate of decline since the data collection began in May 2016.
While average input prices continued to rise, the rate of inflation eased in September. Higher raw material, shipping, and energy costs were cited as contributing factors to this increase.
However, the easing inflation allowed firms to raise selling prices at a slower pace, partly to boost sales as overall confidence waned.
Matthew De Pasquale, Economist at Judo Bank, commented on the sector's challenges, stating, “The manufacturing sector has weakened to cyclical lows through September, with demand soft and business cost pressures remaining elevated.” He noted that the Manufacturing PMI has fallen to its lowest level since the survey began in 2016, outside the pandemic period.
Despite the prevailing difficulties, sentiment in the manufacturing sector remained relatively positive, with firms generally hopeful that improved economic and geopolitical conditions could support demand in the coming year.
However, confidence did ease for the first time in three months and remained well above the survey average.
