Australian PMI: Manufacturing growth remains robust

The Australian Industry Group (Ai Group) Australian Performance of Manufacturing Index (Australian PMI) results show that the manufacturing sector continued to expand in October, extending the index’s period of uninterrupted growth to 25 months.

The Australian PMI fell slightly in the month – by 0.7 points to 58.3. Results above 50 points indicate expansion. The 25 months of uninterrupted expansion measured by the index is the longest run in the data series since 2005.

“The strength of Australia’s manufacturing sector continued into October with production, domestic sales and new orders all growing at encouraging rates,” Ai Group chief executive Innes Willox said. “Employment also lifted – although at a slower pace than in September.”

The food and beverages manufacturing sub-sector – the largest in Australia – lead the way in October at 61.2 points.

Other large sub-sectors including metal products, non-metallic minerals and chemicals also contributed to the positive overall reading as did the smaller sub-sectors of wood and paper products and printing and recorded media.

Willox said that while conditions remained positive for manufacturing, companies were working in conditions of uncertainty.

“While manufacturers are working hard to sustain these robust conditions, the uncertainties hanging over energy prices and energy policy continue to cloud the medium and longer-term outlook – particularly for the more energy-intensive segments of the industry,” Willox said.

“The economic uncertainty is also impacted by drought, global trade disputes, the fluctuating dollar, declining consumer sentiment, fallout from the Royal Commission on lending and the looming Federal election.”

The key findings of the Australia PMI in October:

  • The PMI has indicated positive conditions (results above 50 points) for 25 consecutive months – the longest run of recovery or expansion since 2005.
  • For a third consecutive month, all seven activity sub-indexes in the Australian PMI expanded in October (see table below). Production (up 2.9 points to 61.6), supplier deliveries (up 3.7 points to 60.9) and sales (up 2.3 points to 59.9) were all encouragingly strong, while employment (down 5.4 points to 52.6), new orders (down 3.8 points to 58.8) and exports (down 3.8 points to 55.1) all slowed in comparison to September.
  • Seven of the eight manufacturing sub-sectors expanded in October (trend data), with machinery and equipment the only exception in recording a stable result (down 1.6 points to 49.4). Expansions were strong in the food and beverages (up 0.5 points to 61.2) and wood and paper products (up 2.4 points to 70.7) sub-sectors.
  • The input prices sub-index eased back in October (down 5.6 points to 72.8) after rising quickly in the past three months. Ongoing problems with high energy costs and prices for imported components were noted by many manufacturers. The wages sub-index also fell back from September’s record high (down 2.3 points to 67.0).
  • The manufacturing selling price sub-index increased by 0.9 points to 57.1 in October, indicating more widespread price increases for manufacturing customers after years of falling prices.