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Australian PMI: manufacturing slips back in August

01 September, 2014

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) slipped back into negative territory in August, following a short-lived stabilisation in July.

The index decreased by 3.4 points to 47.3, indicating a mild contraction in activity across the sector (readings below 50 indicate a contraction in activity).

Continuing the recent trend across the eight manufacturing sub-sectors, only the large food, beverages & tobacco (53.8 points) and the smaller wood and paper products (66.3 points) sub-sectors expanded in August.

A decline in new orders (down 3.1 points to 48.8) ended three months of promising expansion.

"The manufacturing sector retreated from the cusp of expansion in August with production, sales, new orders and employment all going backwards," Australian Industry Group Chief Executive, Innes Willox, said. 

"While exports lifted in August, many respondents expressed ongoing concern about the persistent strength of the Australian dollar, which is maintaining the intensity of import competition.

"To date we have not seen the surge in housing construction flow through to the manufacturing sectors traditionally linked to house building such as metal products and non-metallic mineral products.

"In part this appears to be due to higher levels of import competition and in part because the simultaneous reduction in engineering construction is detracting from demand in these sub-sectors. 

"More generally, manufacturers remain cautious about the outlook and continue to focus on reining in their costs, as they battle these weak trading conditions."

Australian PMI: key findings for August

  • The latest Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI slipped back into negative territory in August, decreasing 3.4 points to 47.3 (readings above 50 indicate expansion).
  • The only sub sectors to expand in August were food, beverages and tobacco (up 2.1 points to 53.8) and wood and paper products (relatively stable at 66.3).
  • The large metal products (up 1.0 point to 47.4); machinery and equipment (down 2.0 points to 45.4); and petroleum, coal, chemicals and rubber products (down 4.6 points to 44.1) sub-sectors all contracted this month, although the metal products result represented its highest level since May 2012 – the sub-sector has been contracting for four years.
  • All of the activity sub-indexes contracted in August: new orders ended three months of promising expansion (down 3.1 points to 48.8); manufacturing employment decreased 2.4 points to 47.8; production dropped 4.4 points to 46.3; and supplier deliveries declined 2.7 points to 47.7.
  • On the positive side, exports rebounded 4.4 points to 53.2, despite the high dollar, although this was confined largely to the food, beverages and tobacco sub sector.