Investing.com - Judo Bank's Chief Economic Advisor, Warren Hogan, has shed light on the recent performance of Australia's manufacturing sector. According to his analysis, despite a slight slowdown indicated by a dip in the overall manufacturing Purchasing Managers Index (PMI) for June 2023 to 48.2, there are no signs of an impending recession.
The current PMI figure is still comfortably above the threshold that typically signals economic downturns - usually when it plunges below 42. However, this doesn't mean everything is rosy; several concerning trends have been noted over recent months.
Firstly, new orders and exports from the nation’s manufacturers appear to be losing momentum considerably. This reduced activity suggests a cyclical deceleration within the industry but does not necessarily forecast an imminent collapse.
Interestingly enough though, while production seems sluggish and companies maintain low inventory levels across both raw materials and finished goods categories during this period of soft activity; employment remains surprisingly resilient with its index staying above neutral at 50.0 level.
This indicates that manufacturers aren't just retaining staff through these challenging times but actively seeking additional workforce as well – perhaps indicating their optimism towards prospects or simply preparing themselves for any eventual upturn in demand.
However, one particular area causing some concern among industry observers is a significant decrease in work backlog throughout all sectors within manufacturing - dropping to its lowest point over three years at only 41.7 points on the index scale which could expose businesses to potential risks should new order demand continue declining further down the line.
On a brighter note however, was evidence highlighting easing price pressures seen via falling input/output price indexes reaching cycle lows possibly due to deflationary influences being introduced into the manufacturing pipeline.
And finally, regarding Reserve Bank Australia's upcoming meeting - the latest data may provide them some leeway where interest rates are concerned, allowing more time to gather additional information before deciding if further tightening of domestic monetary policies needs to occur.