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Australian PMIĀ®: Manufacturing rebounds in August despite drought impacts

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) climbed 4.7 points to 56.7 in August, indicating faster growth across the manufacturing sector (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: "The Australian PMI® rebounded in August on the cusp of two years of uninterrupted expansion. The manufacturing sector has confounded doubters in recent years by lifting employment and production but significant headwinds from energy costs and more recently, drought conditions flowing along supply chains, continue to see input costs rise for manufacturers. Food and beverage manufacturers are reporting disrupted supply and higher prices for a range of agricultural inputs, while manufacturers operating in the metals and machinery & equipment sub-sectors who sell to the agricultural sector or its supply chain are reporting reduced sales. An exception is that drought conditions are also lifting meat production as farmers destock. More positively, all seven sub-activity indexes indicated expanding conditions in August and with new orders continuing to come in at growing levels, the immediate outlook is for further growth in manufacturing production and employment," Mr Willox said.

Australian PMI®: Key Findings for August: 

  • The Australian PMI® has indicated positive conditions (results above 50 points) for 23 consecutive months – the longest run of recovery or expansion since 2005.
  • All seven activity sub-indexes in the Australian PMI® expanded in August (see table below). Six of the seven sub-indexes accelerated, with only inventories decelerating (down 3.6 points to 51.1). New orders grew strongly (up 8.5 points to 59.6) while exports, lower than the other activity sub-indexes over the past year, jumped 8.5 points to 58.4.
  • Five of the eight manufacturing sub-sectors expanded in August (trend data*), with expansions in food & beverages, wood & paper products, chemicals, non-metallic minerals (building materials) and machinery & equipment. The metal products sub-sector was broadly stable at 49.3, with many respondents reporting slowing demand and stronger off-shore competition.
  • The input prices sub-index jumped 9.3 points to 77.4, its highest result since March 2011, while wages also continued to rise (up 4.1 points to a record high of 64.7). In response, the selling prices sub-index rose by 5.1 points to 58.1 – the highest result for this sub-index since April 2017.

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Seasonally adjusted

Index this month

Change from last month

12 month average

 

Index this month

Change from last month

12 month average

Australian PMI®

56.7

4.7 

56.7

Exports

58.4

8.5

53.1

Production

57.2

6.9

57.6

Sales

60.7

15.2

55.4

New Orders

59.6

8.5

58.5

Input Prices

77.4

9.3

69.5

Employment

53.3

3.0

54.8

Selling Prices

58.1

5.1

52.9

Inventories (stocks)

51.1

-3.6

52.0

Average Wages

64.7

4.1

60.5

Supplier Deliveries

58.3

1.3

57.2

Cap. Utilisation (%)

77.5

-2.3

78.0

 * All sub-sector indexes in the Australian PMI® are reported in trend terms (Henderson 13-month filter), so as to better identify the trends in these volatile monthly data.

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.

Media Enquiries: Tony Melville – 0419 190 347