Manufacturing soldiers on with further growth

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell by 5.6 points to 54.2 in September 2017, indicating a deceleration in growth after August 2017’s spike to a 15-year high (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Chief Executive, Innes Willox,said: “2017 ‘s recovery in manufacturing activity is continuing, but the September 2017 Australian PMI® suggests that conditions are moderating and growth is decelerating.

“Manufacturing growth was supported by growth in all eight sub-sectors in September 2017 (trend). Non-metallic mineral products (mainly building materials) hit a new record high of 75.5 points, reflecting the strength of demand for building-related products.

“Positive sources of local demand for manufacturers in September 2017 included apartment and infrastructure construction; mining and agricultural equipment; renewables and utilities. Respondents also reported a rare spike in exports of construction-related products for emergency relief and reconstruction in the US following recent hurricane damage. Last orders are now underway for suppliers of components to Australian auto assembly and the final impacts of this on the manufacturing sector overall will be more evident by 2017’s end.

“Of great concern to all manufacturers continues to be the impact of energy and gas prices on their bottom line. Mounting energy costs are further squeezing already-fragile profitability,” Mr Willox said.

Australian PMI®: Key Findings for September 2017:

  • September 2017 marked a 12th consecutive month of expansion for the Australian PMI® and the longest run of expansion since 2007.
  • All seven activity sub-indexes in the Australian PMI® expanded or were stable in September 2017. Exports recovered from August 2017’s mild contraction, while all other sub-indexes expanded, but at a slower rate than in August 2017.
  • All eight manufacturing sub-sectors also expanded in September 2017 led by non-metallic mineral products, which hit a new record high (up 1.5 points to 75.5). Other large sub-sectors grew at a decelerating pace in September 2017.
  • The input prices sub-index rose by 2.9 points to 65.8 in September 2017 – close to its 12-month average. The wages sub-index also climbed a further 2.2 points to 61.2.
  • The selling prices sub-index fell by 4.4 points to 49.3 in September 2017, indicating stable pricing after some sporadic price rises in previous months. The pressure on manufacturers’ margins continues.

Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights. An Australian PMI® reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Australian PMI® results are based on responses from around 200 companies from a rotating sample of manufacturers. The manufacturing sub-sector categories in the PMI match the ANZSIC industry classifications for manufacturing and are weighted, based on 2011-12 industry output data from the ABS.

Source: Ai Group

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