More evidence of a modest manufacturing recovery in Australia

Photo by Ian Waldie/Getty images

Australia’s manufacturing industry is showing signs of recovery.

That’s the view of Michael Workman, Senior Economist at the Commonwealth Bank, in a research note which follows positive data released in February by the Australian Industry Group, when Australia’s manufacturing industry grew at the fastest pace since May 2002.

Although manufacturings’ share of employment has risen to 8%, there’s been a corresponding reduction in the industry’s contribution to GDP which slid to 5.75%.

Manufacturing exports have been rising slightly, but have still dipped as a percentage the total due to the increase in the price for commodity exports.

Recent growth has been driven by the food & beverage sectors, as the industry looks to offset the much publicized declines in auto manufacturing. The food & beverage sector is expected to provide a strong contribution to employment, with strong demand both domestically and overseas. Workman’s report states that food sales account for 40% of retail trade in Australia, and that number increases to 54% including cafes and restaurants.

Internationally, food & beverage manufacturing stands to benefit from Australia’s positioning as a premium quality supplier to the burgeoning middle class in China for exports such as meat and wine. According to Workman, a continuation of the recent export growth in the sector is dependent on the $AUD remaining closer to US70c than US80c.

Workman suggests that the positive trends in the food & beverages sector could be helping to off-set auto manufacturing declines in Victoria and South Australia, as both states have a greater contribution to total employment from the manufacturing sector.

“We expect to see relatively gradual total employment growth of around 180k over 2017, which is sufficient to put some slight downward pressure on the national unemployment rate. Hopefully, manufacturing employment could rise over 2017 by 100k, as it did in the year to November 2016.”

All charts have been supplied courtesy of the Commonwealth Bank.

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