Australian manufacturing hit by supply chain turmoil

Australia’s manufacturing activity shrank during the summer vacation as the outbreak of Omicron caused confusion.

Australian Industrial Group Manufacturing index It decreased by 6.4 points between December and January to 48.4. This represents a challenge for staff availability and further supply chain disruptions. Reads less than 50 points indicate reduced activity.

Innes Willox, CEO of Ai Group, said the two-month decline in performance reversed the situation reported in November when regulations were relaxed in southeastern states.

“Cost pressure was felt strongly just as input prices continued to rise and the selling price index showed a partial recovery in these costs in the market,” he said.

Three of the index’s six manufacturing sectors reported positive conditions. The strongest results show that the building materials sector has risen 6.5 points to 63.4, indicating that the housing construction boom continues. In contrast, food and beverages plummeted 19.2 points to 38.

Meanwhile, six of the seven performance indicators decreased, and only sales increased. Supplier deliveries plummeted from 53.4 points in November to 37.8 points.

“The December and January periods were significantly affected by much higher levels of COVID-19 infection and the surge in the number of quarantined people,” Willox said.

New orders will also decrease by 8 points to 51.3 points.

“The new order index has fallen sharply, indicating less confidence among companies dealing with the new impact of the COVID-19 pandemic,” Willox said.

Corporate confidence declined across the manufacturing industry, but consumer confidence rose 1.7% in the last week of January after reaching its lowest level since October 2020.

The ANZ-Roy Morgan Consumer Confidence Index showed that it was mainly caused by a surge in confidence in New South Wales after a three-week decline.

“This happened in the same week that the CPI in the fourth quarter of 2021 (December quarter) reported an upward surprise,” said David Plank, Dean of the Australian Economics Department.

Unexpectedly, weekly inflation expectations fell slightly after CPI numbers were released and exceeded expectations.

Higher-than-expected inflation and lower unemployment are putting pressure on the Reserve Bank of Australia (RBA) to adjust forward guidance on interest rate outlooks.

From the beginning of the pandemic to the second half of 2021, the RBA has shown that there will be no increase in cash rates until “at least 2024”.

The RBA will meet its first financial board meeting this year on Tuesday.

Australian Bureau of Statistics (ABS) also released data December retail sales, the largest monthly decline since April 2020, show a 4.4% decline. The department store, garment and shoe industries were down particularly sharply, but foot retail was a modest increase.

Following strong consecutive results in November (7.3%) and October (4.9%), they are above pre-pandemic levels.

“Despite this fall, retail sales remain strong … strong consumer spending has continued since the outbreak of the Delta,” said Ben James, ABS Director of Quarterly Economic Statistics.

Rebecca Chu


Rebecca Zhu is an Australian reporter based in Sydney. She focuses on Australia’s economy, property and education. Contact her at [email protected]