Manufacturing

Manufacturing conditions improve again in September 2019

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The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) improved by 1.6 points to 54.7 in September (2019), indicating faster growth across the manufacturing sector (readings above 50 points indicate contraction in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Chief Executive Innes Willox said: “The strengthening of the manufacturing sector over recent months continued to build in September with a further rise in the Australian PMI®. Performance was most robust in the large food & beverage and machinery & equipment sectors and was supported by positive contributions from the chemicals and building products sectors. These areas of improvement were partly offset by further slippages in performance among metal product manufacturers and producers from the diverse textiles, clothing, footwear, paper & printing product groups. While sales and production were down in September, the lifts in employment and new orders are encouraging pointers for coming months – particularly as the favourable impacts of income tax cuts, interest rate falls and the lower Australian dollar continue to build,” Mr Willox said.

Australian PMI®: Key Findings for September 2019:

  • Four of the seven activity indexes in the Australian PMI® indicated accelerating and expanding conditions in September (2019), while three indicated slowing but broadly stable conditions: employment (up 6.2 points to 57.6) and new orders (up 3.8 points to 57.1) were strong, but production (down 3.4 points to 49.8), sales (down 4.8 points to 49.5) and exports (down 6.1 points to 49.6) all weakened to be roughly stable.
  • Four of the six manufacturing sectors expanded in September (2019)(trend) with food & beverages (up 0.2 points to 59.2) still leading the way, followed by a resurgence in machinery & equipment (up 2.5 points to 56.7), which has benefited from increased demand from the mining and defence sectors.
  • The input prices index reported its highest reading of 2019 in September (2019) (up 5.7 points to 71.9), while the selling prices index fell back into contraction (down 3.8 points to 48.9). Some respondents reported increased import competition has restricted their ability to pass on input cost increases.
  • The average wages index rose by a further 3.5 points to 63.8 in September (2019) – the highest reading since October 2018, indicating a higher proportion of businesses are facing wage increases across manufacturing.

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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