Coronavirus impacts manufacturing slowdown in February

Australia’s manufacturing sector recorded a fourth consecutive month
of contraction, with the disruptive effects of the coronavirus adding to
the slowdown, according to Ai Group’s chief executive Innes Willox. The
Advanced Manufacturing Growth Centre (AMGC), however, believes that
“our manufacturing industry stands ready to address issues and
opportunities head on”.

“The coronavirus is negatively impacting
the exports of fast-moving consumable items to China and a number of
businesses reported supply chain difficulties arising from factory
shutdowns in China,” Willox said when releasing the monthly Performance
of Manufacturing Index (PMI).

“The new orders index fell to its lowest level since mid-2013 although sector-wide employment is still holding up,” Willox said.

The
Australian PMI fell to 44.3 in February – its lowest result in almost
five years, and the first time the index has recorded four consecutive
months of contraction since 2014. While the majority of respondents
remain concerned about drought, weak demand from the construction sector
and a general slowdown in the economy, coronavirus emerged as a concern
for respondents for the first time in February, impacting negatively on
the exports of Australian manufactured goods.

Six of the seven
activity indices in the Australian PMI contracted in February, with
employment the only index being broadly stable. Production was down 4.8
points to 40.4, new orders were down 2.0 points to 41.7, sales were down
2.3 points to 43.1, and exports down 5.3 points to 44.5. All indices
contracted at a faster pace than the previous month.

All six
manufacturing sectors experienced weaker conditions in February than in
January. Food and beverage remains the only manufacturing sector in
expansion, but even it has fallen, down 1.9 points to 55.

“There
is no doubt global business conditions are under strain at present,
however, we must not lose sight of the opportunities for advanced
manufacturing to have significant impact be it in relation to energy,
recycling, skills and rebuilding or recovery,” AMGC’s managing director,
Dr Jens Goenermann, said.

“Just today, the Morrison Government
flagged a focus on recycling, urging all entities to look at ways to
combat waste. Already at the forefront of this focus are Australian
manufacturers, who are tackling the issue head-on. Manufacturers such as
Dresden Eyewear, Viridi, VSPC and research groups like NSW Circular
have taken the lead and have developed solutions to our waste issue.

“Broader than recycling are AMGC projects which address advanced building materials, energy generation, productivity and skills.

“We
must remember that while we are facing challenging times right now, our
manufacturing industry stands ready to address issues and opportunities
head on, it is after all a resilient and solutions orientated sector
that will ensure we can bounce back quickly when conditions improve,”
Goenermann concluded.

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