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Manufacturing growth consolidates in January: Australian PMI®

01 February, 2017

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) has expanded for a fourth consecutive month with a reading of 51.2 points in January.

It is down by 4.2 points on December (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

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Ai Group Chief Executive, Innes Willox, said: "Conditions for Australia's manufacturers remained positive in January despite easing from December's end-of-year surge. While domestic sales slipped and there was a build-up of inventories, exports grew further in January and production was held at December's levels. The near-term outlook for the sector as a whole was boosted by another lift in new orders. The major emerging concern – particularly among the more energy-intensive manufacturers – is the deteriorating energy price outlook which threatens to stifle the tentative recovery underway in the sector. Conditions are ripe for the boost to investment that would be provided by an easing of the company tax rate," Willox said.  

Australian PMI®: Key Findings for January:

  • Three of the seven sub-indexes in the Australian PMI® expanded in January (see table below), with the continued expansion of new orders (down 6.9 points to 53.7) a positive indicator for near-term growth.
  • Supplier deliveries (down 5.4 points to 47.0) and sales (down 11.2 points to 47.6) contracted in January, suggesting softer demand coming into 2017 – perhaps rebalancing December’s robust growth.
  • In trend terms*, four of the eight manufacturing sub-sectors expanded in January, with machinery & equipment (up 0.4 points to 57.5) and non-metallic mineral products (up 4.8 points to 65.9) quickening their pace of expansion. Food and beverages (down 0.9 points to 53.9) and petroleum & chemical products (down 0.5 points to 53.5) also continued to grow, if at a slower pace.
  • Wood & paper products (up 1.1 points to 50.5) and metal products (up 1.0 point to 49.9) improved to more stable conditions.
  • The input prices sub-index jumped by 9.5 points in January to 72.3, with some manufacturers questioning their ongoing viability amid surging energy costs. While an expanding selling prices sub-index (up 6.7 points to 52.1) allows some of these cost increases to be passed on, it has been well outpaced by growth in input costs and wages (up 0.7 points to 63.0) in recent months.

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