▪ The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) inched 0.2 points higher to 55.0 points in June (results above 50 indicate expansion with the distance from 50 points indicating the strength of expansion). This was the ninth consecutive month of expansion for the Australian PMI® .
▪ Five of the seven activity sub-indexes in the Australian PMI® expanded in June. New orders strengthened to 59.5 points and sales surged to 60.9 points, indicating healthy demand and positive near term growth. Expansions in supplier deliveries (57.4 points), exports (54.6 points) and production (57.3 points) strengthened in June. Employment moved into mild contraction (49.0 points) while stocks also contracted (44.3 points).
▪ The Australian PMI® continues to indicate stronger conditions in manufacturing than does the ABS measure of value added output (which shrank again in March 2017). This is because the Australian PMI® tracks a broader set of indicators than output volumes alone. Its current strength reflects positive results for new orders, exports, sales and deliveries.
▪ Seven out of eight sub-sectors in the Australian PMI® expanded in June (trend data). Expansions continued across all sub-sectors except textiles & clothing (29.2 points). Wood & paper products strengthened further (65.3 points), as did printing & recorded media (61.2 points) and machinery & equipment (60.1 points). Expansions in petroleum, coal & chemical products (54.1 points), non-metallic mineral products (58.8 points), food & beverages (56.9 points) and metal products (59.0 points) eased in June.
▪ Manufacturers cited steadily rising demand in June. Large construction projects are buoying activity, including in transport, defence and commercial construction, while stronger activity in agriculture and renewable energy is creating other opportunities. Manufacturers involved in the auto assembly supply chain are closing, exiting or moving into other markets. Some manufacturers’ markets are oversupplied, keeping prices depressed. Other challenges noted by manufacturers in June included: energy supply and costs; energy policy uncertainty; rising input prices; exchange rate fluctuations; strong international competition (particularly from Asia); and struggling local retail customers.
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.
