Manufacturers look overseas as sales slump
Sales of manufactured products collapsed in July, a survey of Australian companies suggests, but an uptick in new orders and more overseas demand is offering the industry a glimmer of hope.
"Sales were especially low for the metal products sector in July but expanded for food and beverage manufacturers," the Ai Group said after releasing its Australian Performance of Manufacturing Index on Thursday.
The overall PMI was up 1.9 points to 51.3 in July, edging back above the 50-point mark that separates expansion and contraction in activity, but the sales metric dropped 8.1 points to 42.7.
"This indicates a dramatic fall in sales in July," the report said in a summary of the monthly survey that queries a sample of manufacturers from all states and sub-sectors.
The slump in sales occurred despite the PMI suggesting prices of manufactured goods remained low during the month.
"The selling prices index fell into contraction indicating discounting or falling selling prices for Australian manufacturers," the report said.
Conditions appeared most grim for the metals sector, which hit its lowest level in activity since August 2013 after a sharp contraction in July, as manufacturers cited increased competition from imports and the "downturn in residential construction... negatively impacting sales".
But the building materials sector - which includes companies making wood, glass and furniture products - was optimistic.
"Respondents reported confidence heading into the new financial year, with contracts to supply several large infrastructure and building projects about to commence," it said.
Ai Group chief executive Innes Willox said it was encouraging that the overall new orders index rose 3.2 points to 53.0, suggesting "manufacturers are gearing up for more production in coming months".
New orders were strongest for food and beverages manufacturers, a sector which has been particularly buoyed by foreign demand.
"Export sales were stronger partly due to the downward drift in exchange rates over the first half of 2019 and partly due to strong overseas demand for food, beverages, pharmaceutical and cosmetic products," Mr Willox said.
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