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Manufacturing 'edges ahead' in November: Aust PMI

01 December, 2014

The Ai Group Australian Performance of Manufacturing Index (Australian PMI) increased by a marginal 0.7 points to 50.1 in November.

This increase indicated the slightest of expansions across the manufacturing sector (readings above 50 indicate an expansion in activity, with the distance from 50 indicative of the strength of the increase).

Two of the five activity sub-indexes were above 50 points this month, with new orders up 3.1 points to 54.3 and supplier deliveries climbing 7.2 points to 52.1. In contrast, the production, stocks and exports sub-indexes all declined below 50 points following very mild expansion in October, while manufacturing employment and sales continued to contract.

Among the eight manufacturing sub-sectors, four expanded in November. The large food, beverages & tobacco (up 2.4 points to 59.1 points) and the smaller wood & paper products (up 2.1 points to 61.6 points) sub-sectors continued their recent strong growth, while conditions improved in the textiles, clothing & furniture (up 7.3 points to 54.4) and non-metallic mineral products (up 5.0 points to 50.2) sub-sectors.

"While the improvement in manufacturing activity in November is slight, it and the lift in new orders are welcome signs of the resilience of the sector in the face of still-testing conditions," Ai Group Chief Executive, Innes Willox, said.  

"The lower dollar, an easing in energy costs, moderate wages growth and relatively low interest rates are all helping to underpin the sector's performance.

"Demand for locally made inputs and components flowing from stronger residential construction activity is also a positive for the sector.

"That said, respondents to the Australian PMI noted substantial headwinds with the steep decline in mining investment and the impending closure of Australian automotive assembly stifling business sentiment and the appetite for investment.

"Businesses also noted that the still-strong Australian dollar continues to support intense import competition."

Key Findings for November

  • The Australian PMI increased 0.7 points to 50.1 in November, indicating the slightest of expansions across the manufacturing sector this month.
  • Four of the eight manufacturing sub-sectors expanded in November: food, beverages and tobacco (up 2.4 points to 59.1); wood & paper products (up 2.1 points to 61.6); textiles, clothing & furniture (up 7.3 points to 54.4); and non-metallic mineral products (up 5.0 points to 50.2).
  • The machinery and equipment (up 0.8 points to 44.6); petroleum, coal, chemicals & rubber products (up 1.2 points to 39.9); printing and recorded media (up 5.0 points to 42.8) and metal products (down 1.8 points to 43.2) sub-sectors all continued to contract this month.
  • Two of the five activity sub-indexes – new orders (up 3.1 points to 54.3) and supplier deliveries (up 7.2 points to 52.1) – were above 50 points in November, but the production (down 3.7 points to 47.4), stocks (down 5.0 points to 45.7), and exports (down 2.6 points to 48.1) sub-indexes all declined below 50 points.
  • In the face of rising input costs (up 5.1 points to 70.5), selling prices contracted slightly (down 0.7 points to 49.0) in November, placing significant pressure on manufacturers' margins. The wages sub-index declined a point to 53.3, while employment was broadly unchanged at 47.8 points.

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