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Australian PMI®: Manufacturing correction in August

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) dropped by 9.5 points to 46.9 in August, breaking the manufacturing sector’s 13-month period of unbroken expansion (readings below 50 indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).

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Ai Group Chief Executive, Innes Willox, said: "At 46.9 the August result for the Australian PMI® is the lowest since June 2015 when it was 44.2 points. These low results ‘bookend’ a run of 13 months of expansion (July 2015 to July 2016 inclusive). A sharp fall in food & beverages in August, which had been the mainstay of recent growth, was a major factor in the correction seen in manufacturing activity. Conditions also deteriorated for manufacturers of non-metallic mineral products and the recent growth spurt in the metals products sub-sector came to an end. For manufacturing as a whole, despite gains in a number of other sub-sectors, production, sales, employment and stocks all fell in August. Continued growth in new orders is a ray of optimism for a sector keen to avoid this correction becoming a downturn. The continuing patchiness both of the manufacturing sector and the broader economy underscores the importance of lifting confidence and improving policy settings in areas such as workplace relations, taxation and budgetary policy," Mr Willox said.

Australian PMI®: Key Findings for August:

  • The Australian PMI® has contracted for the first time since June 2015, dropping by 9.5 points to 46.9.
  • Six of the seven manufacturing activity sub-indexes contracted in August, with production (down 9.4 points to 43.0), employment (down 11.9 points to 44.6), exports (down 14.8 points to 44.7), deliveries (down 16.4 points to 46.2) and sales (down 14.1 points to 45.7) all slipping from expansionary results in July.
  • More reassuringly, new orders continued to grow in August, if at a slower pace (down 7.3 points to 51.5), suggesting a correction to a mismatch between production and sales.
  • Five of the eight manufacturing sub-sectors remained in expansion (that is, above 50 points in three-month moving averages): printing & recorded media (up 6.4 points to 63.6), metal products (up 1.1 points to 55.9), petroleum & chemical products (down 2.5 points to 54.8), non-metallic mineral products (down 3.3 points to 53.6) and wood & paper products (down 7.6 points to 52.0).
  • Food, beverages & tobacco slipped into contraction (down 4.0 points to 48.7), joining textiles & clothing (down 1.8 points to 46.3).  
  • The input prices (down 0.3 points to 58.7) and wages (down 3.5 points to 56.2) sub-indexes remained strong, while selling prices reversed the recent expansionary trend to be stable (down 4.4 points to 50.3). 

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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®

46.9

-9.5

52.4

Exports

44.7

-14.8

53.7

Production

43.0

-9.4

53.2

Sales

45.7

-14.1

53.1

New Orders

51.5

-7.3

54.0

Input Prices

58.7

-0.3

63.4

Employment

44.6

-11.9

49.6

Selling Prices

50.3

-4.4

49.6

Inventories (stocks)

48.3

-0.8

51.9

Average Wages

56.2

-3.5

58.2

Supplier Deliveries

46.2

-16.4

52.3

Cap. Utilisation (%)

71.7

-2.4

73.6

* All sub-sector indexes in the Australian PMI® are reported as three-month moving averages (3mma), 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 seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights.  An Australian PMI® reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining.  The distance from 50 is indicative of the strength of the expansion or decline.  Australian PMI® results are based on responses from around 200 companies from a rotating sample of manufacturers. The manufacturing sub-sector categories in the PMI match the ANZSIC industry classifications for manufacturing and are weighted, based on 2011-12 industry output data from the ABS.

Media Enquiries: Tony Melville – 0419 190 347