Australian exports fell sharply in August, ending 11 months of expansion.
According to the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) the exports sub-index fell 14.8 points in August to reach 44.7 points.
Ai Group Chief Executive, Innes Willox, said the fall may reflect the relatively higher Australian dollar. The dollar has been trading between .75c-.76c against the US dollar in recent months.
Overall the Australian PMI dropped by 9.5 points to 46.9 in August, breaking the manufacturing sector’s 13-month period of unbroken expansion (readings below 50 indicate contraction in activity).
The result is the lowest since June 2015 when it was 44.2 points.
A sharp fall in food and beverages in August, which had been the mainstay of recent growth, was a major factor in the correction seen in manufacturing activity, Mr Willox said.
Conditions also deteriorated for manufacturers of non-metallic mineral products and the recent growth spurt in the metals products sub-sector came to an end.
Ray of optimism
For manufacturing as a whole, despite gains in a number of other sub-sectors, production, sales, employment and stocks all fell in August.
Mr Willox said continued growth in new orders is a ray of optimism for a sector keen to avoid this correction becoming a downturn. New orders continued to grow, albeit at a slower pace (down 7.3 points to 51.5).
Six of the seven manufacturing activity sub-indexes contracted in August, with production (down 9.4 points to 43.0), employment (down 11.9 points to 44.6), exports (down 14.8 points to 44.7), deliveries (down 16.4 points to 46.2) and sales (down 14.1 points to 45.7) all slipping from expansionary results the previous month.
“The continuing patchiness both of the manufacturing sector and the broader economy underscores the importance of lifting confidence and improving policy settings in areas such as workplace relations, taxation and budgetary policy,” Mr Willox said.