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Manufacturing sees strong start to 2018: Australian PMI®

01 February, 2018

The Australian PMI® increased by 2.5 points to 58.7 in January, indicating faster growth than at the end of 2017 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Chief Executive Innes Willox said: "Australia's manufacturing industry enjoyed a strong start to the year and added to the longest manufacturing expansion in more than a decade. Food & beverage producers led the way supported by strong showings from businesses in the petroleum, coal & chemicals; metal products; and machinery & equipment sub-sectors. While production and sales volumes were robust and employment also grew, the combination of cost pressures – notably energy costs – and strong competition in part due to the recent rise in the value of the Australian dollar, continued to keep margins tight and restrain wage rises. Now is the opportunity for policy makers to reinforce the optimistic start to the year to secure further investment and employment gains in 2018," Willox said.

Australian PMI®: Key Findings for January:  

  • January marked a 16th month of expanding or stable conditions for the Australian PMI® – the longest run of expansion since 2005.
  • For the third consecutive month all seven activity sub-indexes in the Australian PMI® expanded (see table below), with six accelerating their pace of growth.
  • Five of the eight manufacturing sub-sectors expanded in January (trend data*), led by the very large food & beverages sub-sector (61.4 points). Large differences in conditions were evident, with the petroleum, coal & chemicals sub-sector recording its highest monthly result in almost a decade (67.9 points) while the textiles & clothing sub-sector recorded its lowest monthly result in a similar timeframe (33.5 points).
  • The input prices (down 1.1 points to 69.7) and wages (down 1.1 points to 59.1) sub-indexes continued to recede from November’s historic highs, while the selling prices sub-index indicated mild price reductions in January (down 4.2 points to 49.2). Manufacturers continue to report difficulties accommodating recently elevated energy costs.

Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI® reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Australian PMI® results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI® uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. The Australian PMI® commenced in 1992. More information about the history and methodology of the Australian PMI® is available online.

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