Manufacturing PMI shrinkage eases

From AIG:

 After a sharp drop in August, the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) increased by 2.9 points to a broadly stable 49.8 points in September (results below 50 indicate contraction, the distance from 50 points indicates the strength of contraction).

 The stabilisation in the Australian PMI® in September was heavily influenced by activity in the food & beverages sub-sector which recovered after contracting in August. This key sector (now contributing around 28% of all manufacturing output) appears to have addressed the factors that drove a contraction in production and sales in August.

 Three of the seven activity sub-indexes in the Australian PMI® expanded in September after contracting in August. Production (52.6 points), deliveries (56.4 points) and sales (51.4 points) expanded and exports stabilised (50.0 points). Employment (46.7 points) and stocks (44.3 points) contracted again. New orders slipped into contraction (48.3 points).

 Five of the eight manufacturing sub-sectors in the Australian PMI® expanded in September (three month moving averages), including printing & recorded media (62.8 points), petroleum & chemical products (52.7 points), metal products (51.3 points), food & beverages (52.8 points) and machinery & equipment (52.8 points).

 Comments from manufacturers in September indicate a steady improvement in demand and exports in some sectors after last month’s dip. Variability in the exchange rate and persisting oversupply in some markets is curbing activity. Margin pressures appear to be intensifying due to ongoing high input costs (particularly for imported inputs and energy). Lower government orders, the sharp fall-off in mining construction work and the completion of major infrastructure projects (with no imminent replacement projects in the pipeline) and wet weather in some locations has also dampened activity.

Full report.