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Manufacturing reaches for recovery in October: Australian PMI

01 November, 2013

The manufacturing sector reached for recovery in October with the latest seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) 1.5 points higher at 53.2 (readings above 50 indicate an expansion in activity).

The October 2013 PMI result was largely driven by improvements in new orders (55.7), production (54.5) and deliveries (54.4).  Of the sub-sectors – food, beverages and tobacco was the strongest performer (in three-monthly moving average terms) at 65.6. Mild expansion was also evident in some of the smaller sub-sectors.

Despite the bright spots, manufacturing exports remain very low with the sub-index at 34.1 and employment across the sector continued to contract (48.6).

Australian Industry Group chief executive, Innes Willox, said: "October saw the manufacturing sector build on the modest gains recorded in September

"Production expanded for the first time in two and a half years and new orders continued to recover. While there are certainly encouraging signs, it is too early to call a recovery with a good share of the gains representing a catch-up following a very slow mid-year period.

"The fundamentals facing the sector remain very tough with the domestic currency still a major barrier to export growth and an impediment to businesses seeking to win back market share from imports.  In addition, manufacturers' margins remain under pressure as wage and non-wage costs continue to rise ahead of selling prices," Willox said.

Other key findings for October included: metal products (37.7), machinery and equipment (41.9), and textiles, clothing, footwear, furniture and other manufacturing (38.0) all continued to contract for the three months to October; input prices (69.1) and wages (55.8) remained high while selling prices continued to contract (47.2); and manufacturers' capacity utilisation rate was broadly stable, with 72.5 per cent of total capacity in use in September.

Each month Ai Group releases performance indices for the manufacturing, services and construction sectors. These national composite indices are compiled through surveys of firms, conducted on a representative sample basis. They are seasonally adjusted and based on the diffusion indexes of key indicators including sales & activity, new orders, supplier deliveries and employment, with varying weights.

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