The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) dropped by 1.5 points to 52.5 in July, indicating a weaker rate of expansion compared to the previous month (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

“The supply and labour constraints afflicting the Australian economy are weighing heavily on the manufacturing sector. Production and employment both fell in July, as manufacturers struggle with chronic labour shortages and supply chain interruptions,” Ai Group chief executive Innes Willox says.

“New orders rose this month, but our manufacturers simply can’t meet this demand without more workers. Manufacturing has a key role to play in reducing the inflationary pressures facing Australia. To unlock the industry’s full potential we need to promptly address skilled labour shortages.”

Australian PMI key findings for July 2022 are:

• Manufacturing activity slowed in July. Most subsectors eased but the metal products sectors recovered strongly.
• Labour challenges, supply chain disruptions and high energy prices remain the major structural constraints on manufacturing.
• Input prices declined for the first time since February 2022 but remain at very high levels. Employment declined, reflecting labour shortage pressures on manufacturing businesses.
• Most manufacturing activity indicators declined in July. However, new orders and sales strengthened, despite tight supply chain pressures.

The full report can be downloaded here.