The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) increased by 3.3 points to 54.2 points in November, indicating a more convincing expansion after more stable conditions recently (results above 50 indicate expansion, the distance from 50 points indicates the strength of expansion).
The expansionary conditions were broad-based, with six of the seven sub-indexes in the Australian PMI® indicating expansion in November. The strong lift in new orders (59.5 points) together with solid growth in sales (53.5 points) is promising. Exports (55.9 points) continue to provide a source of growth for manufacturers. Deliveries (52.7 points) continued to expand, while production (53.5 points) and employment (52.3 points) returned to growth. The only activity index to contract in November was inventories (46.2 points). The November result points to gathering momentum for the sector.
Three of the eight sub-sectors in the Australian PMI® expanded in November (three month moving averages), two were stable and three sub-sectors contracted. Food & beverages (56.5 points) and petroleum & chemical products (57.1 points) continue to outperform the other sub-sectors. Encouragingly, machinery & equipment (54.9 points) posted a third straight month of growth, while printing & recorded media (50.8 points) cooled to more stable conditions and non-metallic mineral products (50.8 points) lifted out of contraction to stable conditions in the month. Metal products (46.2 points), wood & paper products (41.9) and textiles & clothing (36.8 points) remained in the doldrums in the month.
Comments from manufacturers in November indicate a general pickup in demand and confidence, while the relatively lower dollar and increased exports continue to provide momentum to many manufacturers. Weather conditions appear to be impacting manufactures, both directly and through increased raw material prices. Also, some concerns of a slowing economy and a volatile exchange rate are weighting on activity while sourcing affordable, skilled labour and rising input costs (inducing energy prices) are presenting problems for other manufacturers
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.
