The manufacturing industry expanded for a third consecutive month in September, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) increasing by 0.4 points to 52.1 points. This indicated a slightly faster pace of expansion (readings above 50 points indicate expansion) (seasonally adjusted). § This was the strongest reading for the Australian PMI® since May 2015 (52.3 points) and the first run of three consecutive months of expansion since July 2010. Four of the past five months have now seen Australian PMI® results of above 50 points (indicating expansion). § Four of the eight manufacturing sub-sectors in the Australian PMI® expanded in September, as did six of the seven activity indexes. Only stocks (inventories) declined. § Manufacturing employment stabilised this month, with the sub-index at 50.7 points. § The key reasons cited by respondents to the Australian PMI® for improving conditions in September were stronger local orders and exports, due to the lower Australian dollar. Increased residential construction is also strengthening demand for building materials and related housing products. Reduced orders from local automotive assemblers, mining and heavy engineering projects continue to take their toll on metal products and machinery.
That almost looks like a sustained uptrend.
Whether it can last will depend upon the mix of dollar-related and local demand factors. I suspect the housing construction boomlet is playing a largish role and as it comes off early next year we may see the PMI come under renewed pressure. If the dollar keeps falling there’ll be some offset.
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.
