▪ The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) decreased by 1.2 points to 57.5 points in February, indicating further expansion in the month but at a slightly slower pace than in January (seasonally adjusted). Results above 50 points indicate expansion with higher results indicating a stronger expansion.
▪ February marked a seventeenth month of expanding or stable conditions for the Australian PMI® and the longest run of expansion since 2005. The Australian PMI® has 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 February. This marks a fourth consecutive month in which all seven activity sub-indexes have expanded. Five of the seven activity indexes slowed in February however, with only the employment and exports sub-indexes accelerating.
▪ Six of the eight sub-sectors in the Australian PMI® expanded in February and two contracted (trend). The larger manufacturing sub-sectors are continuing to see a sustained period of expansion and/or recovery, with six sub-sectors indicating expanding conditions since at least January 2017. Weaker conditions remain evident in the textile clothing & other; and the printing & recorded media sub-sectors.
▪ Input prices (68.5 points) and wages (56.8 points) continued to recede from the recent highs recorded in late 2017. Selling prices (50.6 points) were broadly stable in February.
▪ Labour and skill shortages are arising as issues for more manufacturers in 2018. Some participants in the Australian PMI® reported increased reliance on overtime to cover higher than usual activity over recent months. Many manufacturers are now looking to employ more staff but are finding it difficult to find skilled workers for their locations and/or specialisations. Manufacturers continue to report high energy costs eating into margins.
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.
