Australian PMI®: Positive start to new financial year for manufacturing

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) rose 1.8 points to 53.1 in August 2019, driven by increasing levels of production and rising exports (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: “Stronger production, sales, and employment combined in a small though encouraging lift in the Australian PMI® for August (2019). While it is only expanding at a modest pace, the further growth in manufacturing in August (2019) is heartening and, together with a rise in new orders, will help allay fears of a further slowdown in business conditions. Building, wood & furniture manufacturing and food & beverages production continued as the fastest growing sectors while machinery & equipment producers and manufacturers in the petroleum & chemicals group also reported improved performance. The lift across these sectors was partly offset by sharply negative conditions in the metal and textiles & paper product groups,” Mr Willox said.

Australian PMI®: Key Findings for August 2019:

  • All seven activity indexes in the Australian PMI® indicated expansion in August 2019, with production (up 4.9 points to 53.2) and sales (up 11.6 points to 54.3) rising back into positive territory. Both new orders (up 0.3 points to 53.3) and exports (up 1.1 point to 55.7) expanded at a faster pace than in July 2019.
  • Four of the six manufacturing sectors expanded in August 2019 (trend) with the food & beverages (down 1.7 points to 55.8) and building materials, wood & furniture (down 0.5 points to 59.6) sectors still leading the way, but at slower rates of growth. The machinery & equipment sector improved after several months of poor conditions (up 1.6 points to 52.5) while metal products (down 0.3 points to 37.9) and TCF, paper & printing (down 0.6 points to 41.7) both fell to their lowest levels since 2013.
  • The input prices index was largely unchanged in August 2019 (down 0.1 point to 66.2), while the selling prices index rebounded 3.5 points to climb back into expansion at 52.7).
  • The average wages index rose by 3.4 points to 60.3 in August 2019, indicating a higher proportion of businesses are facing wage increases across manufacturing – perhaps reflecting increases linked to 2019’s 3.0% minimum wage increase making their way through the system of industrial awards and agreements.

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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