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Manufacturing recovers over holiday period

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) increased by 3.2 points to 55.3 over the summer holiday period (December 2020 and January 2021*), with manufacturing businesses reporting stronger and more broad-based recovery over the normally quiet holiday season (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

Ai Group Chief Executive Innes Willox said: “In December and January Australian manufacturing continued to make up ground lost during much of 2020. Production, employment and exports all expanded although domestic sales were down on November levels. The food & beverages, machinery & equipment and chemicals sectors were particularly strong and more than made up for a flat metal products sector, a further decline in building products and weakness among textiles, clothing, footwear, paper & printing businesses. While the sector has not returned to pre-COVID conditions, the turnaround from September is more decisive than was expected and is an encouraging sign of the resilience of Australian manufacturing and the effectiveness of fiscal and monetary policy measures in response to COVID. However, it is clearly still far too early to proclaim a full recovery of the sector,” Mr Willox said.

Australian PMI®: Key Findings for December 2020 and January 2021

  • Six of the seven activity indices in the Australian PMI® expanded in December 2020 and January 2021 (see table below), with only the sales index contracting (down 4.2 points to 46.5). The exports index jumped into strong expansion (up 11.4 points to 61.4), driven by exports of food & beverages.
  • Three of the six manufacturing sectors in the Australian PMI® expanded in December and January, with the food & beverages (up 16.4 points to 59.5), machinery & equipment (up 6.5 points to 66.5) and chemicals (up 8.4 points to 66.3) sectors all increasing at an accelerating pace over the two months. The metal products sector was stable (down 6.0 points to 50.6) while textiles, clothing, footwear, paper & printing plunged into contraction (down 24.4 points to 47.2).
  • The input price index eased slightly over the holiday period (down 0.2 points to 64.4), indicating marginally slower price increases on average, while selling prices remained stable (up 1.2 points to 50.8).
  • The average wages index (down 3.8 points to 56.4) eased below its long-run average (58.6 points) after rising sharply in November in response to increases to manufacturing award pay rates.

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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