Australia’s manufacturing sector strengthened further in August, with the Australian Industry Group’s Performance of Manufacturing Index (PMI) rising to 51.7 points from 50.4 points in July:
The manufacturing industry expanded for a second consecutive month in August, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) increasing by 1.3 points to 51.7 points, indicating a faster pace of expansion (readings above 50 points indicate expansion) (seasonally adjusted).
The Australian PMI® typically ‘leads’ ABS data for manufacturing output by around three months. Recent results from the Australian PMI® suggest manufacturing output (measured as ‘value added’ by the ABS) is likely to have been flat (i.e. no growth) in recent months, after achieving small recoveries in industry-wide output in the six months to March 2015. The ABS will release manufacturing output data for Q2 2015, as part of the quarterly National Accounts release, on Wednesday 2 September.
Three of the eight manufacturing sub-sectors in the Australian PMI® expanded in August: food and beverages (for a 15th month); wood and paper (for a sixth month); and textiles, clothing, footwear, furniture and other manufacturing.
Four of the seven activity sub-indexes in the Australian PMI® expanded in August: new orders (after two months of contraction), production, supplier deliveries (for a second month) and employment. Sales returned to contraction and stock levels contracted for a seventh month. Manufacturing exports also contracted in August after three months of expansion.
Increased residential building activity and strong demand for food and beverages continue to benefit their downstream manufacturing suppliers within the Australian PMI®. However, the progressive closure of local automotive assembly, and further declines in mining and other business investment in machinery and equipment are heavily affecting other parts of manufacturing, with ongoing reports of business consolidation and closures.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
