The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) eased 4.7 points to 53.4 points in April indicating expansion at a slower rate than in March (results above 50 points indicate expansion).
§ This April result comes off a very strong Australian PMI® in March (the highest since April 2004) and continues the current run of expansions to ten months, the longest unbroken period of growth for the Australian PMI® since September 2006.
§ The depreciation of the Australian dollar in recent years is still a central source of strength, assisting growth in exports and import-competing sales. Although the Australian dollar has appreciated again, key manufacturing sectors continue to expand, albeit at a slower pace.
§ Of the seven activity sub-indexes in the Australian PMI® all expanded in April except employment. Production (56.8 points), sales (56.8 points) and stocks (56.7 points) expanded strongly. New orders grew at a slower pace, but remained in mild expansion.
§ Five of the eight manufacturing sub-sectors in the Australian PMI® expanded in April (three month moving averages), the same number as March. The large food & beverages sub-sector, continued to outperform the other sectors, moving up to a record 74.1 points. Wood & paper also expanded strongly in April (65.8 points) as did non-metallic mineral products (57.5 points). The March recovery in the machinery & equipment sub-sector was short-lived with this key sub-sector moving back into contraction in April (47.8 points).
§ Comments from manufacturers in April reveal mixed conditions, with demand subdued in some sectors. Tight margins and increasing competition are recurring themes. The recent rebound in the Australian dollar as well as the extended Easter holiday period appear to have taken some steam out of 2016’s recovery to date. Pessimism about the economy, the upcoming Federal election and a lack of large infrastructure projects is also hindering local demand. More positively the partial recovery in some commodity prices (such as iron ore) is reviving interest in some sectors.
Dollar, election, slowing wider spending, no surprises here. Full report.
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.
