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Manufacturing 'broadly stable' in October: Aust PMI

04 November, 2014

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by 2.9 points to 49.4 in October.

This increase indicated conditions were very close to stable across the manufacturing sector (readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease).

Of the five activity sub-indexes, production (up 8.6 points to 51.1), new orders (up 5.3 points to 51.1) and stocks (up 5.3 points to 50.8) all moved above 50 points, but only pointed to a very mild expansion in conditions.

Manufacturing exports also expanded mildly (up 8.5 points to 50.7), partly in response to the dollar's recent depreciation but limited to the food, beverages & tobacco sub-sector.

Among the eight manufacturing sub-sectors, the large food, beverages & tobacco (56.7 points) and the smaller wood & paper products (59.5 points) were once again the only sub-sectors to expand this month.

"The slide in manufacturing activity we have seen for the past couple of months has eased, with the sector broadly stable in October," Australian Industry Group Chief Executive, Innes Willox, said.

"However, conditions remain patchy within the manufacturing sector with considerable differences between sub-sectors and with production and new orders lifting, whereas employment fell further during the month.

"Respondents to the Australian PMI indicated that despite the fall in the Australian dollar since early September, it remains relatively high and import competition remains intense.

"More generally, businesses remain cautious and hesitant about undertaking the investments needed to underwrite future productivity and employment growth."

Australian PMI – Key Findings for October

  • The Australian PMI increased 2.9 points to 49.4 in October – a third month of contraction, but an indication that conditions are approaching stability (readings below 50 indicate a contraction in activity, with the distance from 50 indicative of the strength of the decrease).
  • The only sub-sectors to expand in October were food, beverages and tobacco (up 1.8 points to 56.7) and wood & paper products (down 3.7 points to 59.5).
  • The machinery and equipment (down 1.3 points to 43.8); petroleum, coal, chemicals and rubber products (down 2.2 points to 38.7); and the non-metallic mineral products (up 0.5 points to 45.2) sub-sectors all continued to contract this month. The very large metal products sub-sector (down 2.9 points to 45.0) also contracted – for a 50th consecutive month.
  • Three of the five activity sub-indexes – production (up 8.6 points to 51.1), new orders (up 5.3 points to 51.1) and stocks (up 5.3 points to 50.8) – were above 50 points in October, but pointed to a very mild expansion in conditions at best.
  • The six-month moving average of the employment sub-index (down 1.5 points to 47.5 in October) suggests annual growth in ABS manufacturing employment (trend) is likely to remain slightly negative over the remainder of 2014.
  • A mild expansion in manufacturing exports (up 8.5 points to 50.7), partly in response to the dollar's recent depreciation, was limited to the food, beverages & tobacco sub-sector.
  • The input prices sub-index of the Australian PMI moved up by 5.2 points to 65.3 points – the highest level since March 2014 – perhaps reflecting rising prices for imported inputs as the dollar weakens.

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