Employment and new orders drive positive PMI

The Australian manufacturing sector has picked up again after a run of slower months, rising 1.6 points in the September Australian Performance of Manufacturing Index (PMI).

Employment and new orders rose, buoyed by growth in the food and beverage and machinery and equipment sector. In addition, manufacturers who supply the mining and defence sectors reported better conditions.

Slower growth was reported by the metals, textiles, clothing and footwear, and building materials, wood, furniture and other sectors in September.

The September PMI showed the highest input price reading in 2019, which the report puts down to global supply disruptions, particularly for inputs such as oil and nickel, but could also be driven by a weakening Australian dollar.

Wages and employment were strong in the September PMI, and new orders grew positively.

“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,” said Ai Group chief executive, Innes Willox.

Negative conditions were felt in the sales and export indices, and contractions in the building and construction dependent sectors could be due to slowing residential building.

The report notes that growth in the machinery and equipment sector may also have come from approvals for major infrastructure projects.

“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,” said Willox.