Australia’s manufacturing sector faced continued challenges in October, with the Judo Bank Manufacturing PMI inching up slightly to 47.3 from September’s 46.7. This minor improvement still reflects a contraction in activity, marking the ninth consecutive month of decline. Reduced demand, particularly in new orders, has extended this downward trend, with the sector struggling as domestic and global pressures weigh on production and sales.

Sharp Drop in New and Export Orders

One of the biggest contributors to the overall decline was a sharp drop in new orders, as the sector continued to contract after nearly two years of decreased activity. Export orders saw an even steeper decline due to lower demand from key international markets, further affecting production levels. Manufacturers are finding it challenging to keep up with reduced demand, even as they work through existing backlogs.

Labor and Inventory Adjustments Amid Weak Demand

October also marked the fifth consecutive month of falling employment levels, with job cuts accelerating at the fastest pace since July. In response to dwindling demand, firms scaled back purchasing activity, hesitating to hold extra raw materials. By reducing their stock levels, manufacturers aim to limit financial risks amid uncertain market conditions, focusing instead on clearing outstanding work and adjusting production as needed.

Delays in Deliveries and Rising Input Costs

Supply chain issues also remain a concern, with delivery lead times lengthening due to delays in Asia and the Red Sea region. Shipping costs and input prices have risen, adding more pressure to manufacturing operations. Despite these obstacles, business sentiment is optimistic, as manufacturers expect an eventual improvement in economic conditions to support future production growth.