▪ The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) increased by 2.5 points to 58.7 points in January, indicating faster growth in January 2018 than at the end of 2017 (seasonally adjusted). Results above 50 points indicate expansion with higher results indicating a stronger expansion.
▪ January marked a sixteenth month of expanding or stable conditions for the Australian PMI® and the longest run of expansion since 2005. The Australian PMI® has now been growing or stable in all but two months (Aug and Sep 2016) since July 2015.
▪ All seven activity sub-indexes in the Australian PMI® expanded in January. This marks a third consecutive month in which all seven activity sub-indexes have expanded. Six of the seven activity indexes accelerated in January, with only the employment sub-index decelerating a touch.
▪ Five of the eight sub-sectors in the Australian PMI® expanded in January, one sub-sector was stable and two contracted (trend). Large differences in conditions are evident. The petroleum, coal and chemicals sub-sector’s index rose to its highest monthly result since at least 2009 (67.9 points), while the textile, clothing & other sub-sector recorded its lowest monthly result since at least 2009 (33.5 points). Expansion accelerated in the food and beverages sub-sector and the metal products sub-sector.
▪ Input prices (69.7 points) and wages (59.1 points) continued to recede from recent highs in November. Selling prices (49.2 points) indicate mild price reductions in January. Manufacturers continue to report that higher energy costs are eating into their margins.
▪ Participants in the Australian PMI® noted increased activity for manufacturers who are supplying upcoming infrastructure projects and the mining industry. Some participants said they are losing export shares again due to strong international competition and possibly due to recent rises in the Australian dollar since late 2017.
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.
