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Australian PMI®: Manufacturing edges higher again in July 2019

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The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) rose 1.9 points to 51.3 in July 2019, climbing back into expansion after falling into contraction in June 2019 for the first time in almost three years (readings below 50 points indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).

Ai Group Chief Executive Innes Willox said: “Australian manufacturing edged back into growth in July (2019) as continued expansion of the food & beverages, chemicals, and building-related products sectors outweighed ongoing deterioration in activity in the metal products and textile, clothing, footwear, paper & printing sectors. Machinery & equipment manufacturers moved closer to stabilisation boosted by infrastructure-related sales. While production fell, export sales were stronger partly due to the downward drift in exchange rates over the first half of 2019 and partly due to strong overseas demand for food, beverages, pharmaceutical and cosmetic products. Pressures on manufacturers’ margins continued in July (2019) in the face of weak domestic sales and selling prices even though the pace of increases in wages and other input costs eased. In encouraging pointers for the months ahead, both new orders and employment expanded in July (2019),” Mr Willox said.

Australian PMI®: Key Findings for July (2019):

  • Four of the seven activity indexes in the Australian PMI® expanded in July 2019. Despite falls in sales (down 8.1 points to 42.7) and production (down 3.6 points to 48.3), a return to positive territory for supplier deliveries (up 4.8 points to 51.9) and a stronger new orders index (up 3.2 points to 53.0) suggest manufacturers are gearing up for more production in coming months.
  • The exports index improved again in July 2019 (up 1.5 points to 54.6), with strong overseas demand for Australian consumable manufacturing products such as food, beverages, pharmaceuticals, vitamins and cosmetics.
  • Three of the six manufacturing sectors expanded in July (2019) (trend), with the gap between the expanding and contracting sectors growing in recent months. Food & beverages (down 0.7 points to 59.2) and building materials, wood & furniture (up 1.3 points to 63.7) led the way, while heavy industrial sectors including metals (down 2.9 points to 35.4) and machinery & equipment (up 1.0 points to 48.8) continued to report weak conditions.
  • The input prices index eased again in July (2019) (down 1.1 points to 66.3), but there was also a gentle fall in selling prices (down 0.4 points to 49.2).
  • The average wages index fell by 2.8 points to 56.9 in July (2019), indicating a slower rate of wage increases across the manufacturing sector despite the 1 July (2019) 3.0% minimum wage rise.

Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI® reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Australian PMI® results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI® uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. The Australian PMI® commenced in 1992. More information about the history and methodology of the Australian PMI® is available online.

Source: Ai Group

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