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Australian PMI®: Manufacturing sees a stronger start to 2016

The Australian manufacturing sector expanded for a seventh straight month in January, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) declining marginally by 0.4 points to 51.5 to remain above the 50-point level separating expansion from contraction. This result continued the longest run of expansionary readings since 2010.

Ai Group Chief Executive, Innes Willox, said: "The manufacturing sector opened 2016 by continuing the positive momentum built over the second half of 2015. The benefits of the lower dollar continue to accumulate with local manufacturers enjoying greater shares of the domestic market and increased export opportunities. The ongoing strength of new orders points to further growth in the months ahead, notwithstanding the contraction in business for automotive supply chains and the further decline in orders from the resources sector. While the overall growth is clearly encouraging, there is still a considerable way to go before manufacturing is contributing fully to the much-needed diversification of the domestic economy," Mr Willox said.

Australian PMI®: Key Findings for January:

  • The Australian PMI® expanded for a seventh month in January, albeit at a slightly slower rate than in December, slipping 0.4 points to 51.5.
  • Four of the eight manufacturing sub-sectors expanded (that is, above 50 points in three-month moving averages), led by wood & paper products (unchanged at 64.3); petroleum, coal, chemical & rubber products (up 3.9 points to 59.1); and food, beverages and tobacco (up 4.9 points to 56.7). Textiles, clothing, furniture and other manufacturing was broadly stable (50.1 points).   
  • The non-metallic mineral products sub-sector ended three months of expansion (down 6.4 points to 47.8), while machinery and equipment remained in contraction but is moving steadily towards stabilising with its best result since June 2014 (up 0.4 points to 47.6).
  • Of the seven activity sub-indexes (see table below), new orders (down 2.5 points to 52.8), exports (down 1.0 points to 53.9) and production (up 0.8 points to 52.9) remained strongly positive, while stocks were replenished (up 10.7 points to 59.2) after two months of contraction prior to the summer break.
  • Sales slipped after two months of strong growth (down 9.0 points to 44.1).
  • The manufacturing employment sub-index returned to contraction after its 12-month high in December, dropping 5.3 points to 47.1.
  • The input prices sub-index fell 2.0 points to 63.6 in January, while wages ticked up 1.3 points to 59.3.  
  • Manufacturing selling prices spent a second month in expansion (down 0.7 points to 51.5), suggesting pressure on input prices is now being passed on in part, despite fierce competition.

Full report (available at 9.30am): http://www.aigroup.com.au/portal/site/aig/economicindicators/
Media enquiries: Tony Melville 0419 190 347

Seasonally adjusted

Index
this month

Change from
last month

12 month
average

 

Index
this month

Change from
last month

12 month
average

Australian PMI®

51.5

-0.4

49.5

Exports

53.9

-1.0

52.4

Production

52.9

+0.8

50.0

Sales

44.1

-9.0

48.8

New Orders

52.8

-2.5

49.7

Input Prices

63.6

-2.0

67.9

Employment

47.1

-5.3

49.2

Selling Prices (unadj.)

51.5

-0.7

48.8

Inventories (stocks)

59.2

+10.7

47.9

Average Wages (unadj.)

59.3

+1.3

58.3

Supplier Deliveries

47.1

+1.0

50.0

Cap. Utilisation (%)(unadj.)

71.3

-4.6

72.2

* 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.