Australian manufacturing sees worst result since 2015 as drought, bushfires bite

The Australian Industry Group’s Performance of Manufacturing Index for January showed contraction in every sector except one, with a “disappointing” start to the new year and decade impacted by bushfires, drought and slow local consumption, as well as global factors.


The January PMI recorded a result of 45.4, a decline of 2.9 points from December. A result under 50 indicates contraction and above it growth.


The result was the worst since 2015, according to the Ai Group’s index, which also registered sub-50 results in every sector except food & beverages (see graph below.). Every activity index was under 50 (an export result of 49.8 is considered stable.) 


Ai Group chief executive Innes Willox said that, “Australia’s manufacturers are seeing a disappointing start to this new year and new decade. Activity, new orders, deliveries, sales and exports all slowed in the last months of 2019 and this has continued into January, affecting all segments of manufacturing.”


“The combined impact of global trade disruptions, slow local consumption, the residential construction downturn, drought and the ongoing bushfire crisis are taking their toll on local production this summer. Drought and fire continue to disrupt activity, reduce demand and push up prices for key inputs for food processors and other manufacturing sectors.”


Last month Moody Analytics estimated the cost of the bushfires would exceed the $4.4 billion of the 2009 Black Saturday fires, and “the risk of there being broader macroeconomic spillovers this season are high.” Over 11 million hectares have burnt this season

The Ai Group noted that January has brought a new source of global disruption and disaster in the form of the coronavirus outbreak. China and its neighbours were “key export markets for Australian food, beverages and other manufactured goods” and exports were likely to be hit in the short-term.


Picture: Mike Bowers/The Guardian


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Picture: Ai Group

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