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September Australian PMI®: Manufacturing holds on to its gain

02 October, 2009

Manufacturing held on to its gains in September with activity expanding for the second consecutive month according to the latest Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®).

The seasonally adjusted index was up slightly in September by 0.3 points to 52.0, its highest level since December 2007, 21 months ago.

The continuing modest growth in September was driven by rises in production, inventories and supplier deliveries. Employment in the sector came close to stabilising, falling only slightly, following 20 months of declines.

Across the sector, the improvement in manufacturing activity broadened with seven of the twelve sub-sectors growing in September, compared with six in August and four in July.

Ai Group Chief Executive, Heather Ridout, said: "While the continuing modest growth is welcome news the improvement in conditions remains tentative with new orders growth easing back significantly in September following a solid lift in August.

"The September Australian PMI® result underlines the importance of the monetary and fiscal stimulus to industry. Winding back either too early would pose real risks to the recovery.

"The very steep rise in the exchange rate is equivalent in key respects to a monetary tightening. This further strengthens the case to leave interest rates at current levels," Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said: "The continuation of August’s modest improvement in the conditions facing manufacturers suggests that demand for their products is starting to lift, albeit tentatively at this stage.

"The improvement is welcome. However, while average selling prices increased slightly in September, pressures on margins will remain strong, as cost and wages growth have also strengthened. Ongoing focus on cash flow management will remain critical, particularly until the improvement in manufacturing conditions becomes sustained," Billings said.

Australian PMI® Key Findings for September:

- The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian PMI® was up a slight 0.3 points in September, to 52.0 with the 50 point mark separating expansion from contraction.
- Seven sectors saw rises in activity compared with six in August and four in July.
- Activity was essentially stable in the construction materials sector and fell more slowly in two other sectors.
- In unadjusted terms, seven of the twelve sectors reported higher production, up from five in the previous month.
- New orders grew only slightly in September, following a large lift in August.
- The rate of decline in employment slowed sharply in September, following 20 consecutive monthly falls in manufacturing employment.
- Average wages growth lifted in September with the index registering a rise of 2.6 points, to 57.0.
- Manufacturing inventories rose slightly in September, following 11 months of inventory rundowns.
- Supplier deliveries grew, albeit slightly, for the second consecutive month.

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