Yes, it’s a rebound in the PMI, to shrinking more slowly:
The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) increased by 2.9 points to 49.4 points in October (seasonally adjusted), indicating conditions were very close to stable across the manufacturing sector this month (readings below 50 points indicate contraction). However, the three-month moving average moved slightly lower, to 47.7 points in October. Recent results from the Australian PMI® suggest annual growth in manufacturing output (as measured by ABS gross value added volumes) is likely to remain at or below zero in the September and December quarters of 2014.
Three of the five activity sub-indexes were above 50 points in October, but pointed to a very mild expansion in conditions at best. The production, new orders, and stocks sub-indexes of the Australian PMI® all moved above 50 points (i.e. expansion) this month. Manufacturing exports also expanded mildly in October, partly in response to the depreciation of the Australian dollar since early September. This month’s expansion in manufacturing exports was limited to the food, beverages and tobacco sub-sector. The employment, supplier deliveries and sales sub-indexes all contracted this month (i.e. readings below 50 points).
Across the eight manufacturing sub-sectors in the Australian PMI®, only the large food and beverages (56.7 points) and the wood and paper products (59.5 points) sub-sectors expanded in October. All other sub-sectors contracted again this month (three-month averages).
Respondents to the Australian PMI® indicated that despite a depreciation in the Australian dollar since early September, it remains relatively high and is still supporting intense import competition. More generally, businesses remain cautious and reluctant to invest. As the end of Australian automotive assembly moves closer and mining expansion slows, many manufacturers remain wary about the outlook for locally-made products and components.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
