For one month anyway, we finally have some good news for manufacturing with the release of the September PMI:
The latest seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) improved by 5.3 points in September, rising to 51.7 points. This was the first month since June 2011 that the Australian PMI® has moved above 50 points, indicating mild expansion across the manufacturing industry (50 points marks the separation between expansion and contraction in the Australian PMI®).
This month’s move into expansion was driven by strong rises in the sub-indexes for new orders and supplier deliveries, both of which moved well above 50 points. Inventories were broadly stable at just over 50 points. Production and employment improved this month, but remained just below the 50-point level that separates expansion from contraction.
Across the sub-sectors, expansion is strongest in the food, beverages and tobacco sub-sector, with mild expansion also evident in some of the smaller sub-sectors. The metal products and machinery and equipment sub-sectors continue to show severe contraction.
Comments from survey participants indicate that the benefits of: (1) a lower Australian dollar; (2) lower interest rates; and (3) the recent Federal election are showing through in improved sentiment and actual orders from Australian-based customers. Businesses said this improvement is so far weak but still noticeable. They also noted however, that new orders are still declining from mining industry customers and from the public sector.
The lower Australian dollar is still mainly benefiting local orders (i.e. import replacement) rather than outright growth in exports. Businesses noted that export markets remain tough.
Here are the components:
And the actual figures:
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Inventories have been falling for much of this year so the sentiment bounce may be triggering a restock that will run for a quarter or two. That’s good news. The crunch will come when that pulse runs its course and its continuation will hang on whether real demand emerges behind it.
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.
