The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell by 0.1 points to 57.4 points, indicating a slightly slower – but still buoyant – rate of expansion in June (seasonally adjusted). Results above 50 points indicate expansion with higher results indicating a stronger expansion.
The Australian PMI® has indicated positive conditions (results above 50 points) for twenty-one consecutive months.
Six of the seven activity sub-indexes in the Australian PMI® indicate expansion in June, with only the finished stocks sub-index remaining stable. The new orders sub-index fell in June but remains expansionary, indicating a strong likelihood of further near-term manufacturing growth. This is despite some participants citing a reduction in new orders due to the approaching end of the financial year. The employment sub-index remains buoyant and has indicated stable or expanding conditions since late 2016. ABS employment data indicate manufacturing employment is at its highest level since August 2012.
Seven of the eight sub-sectors in the Australian PMI® expanded in June, with only the textiles, clothing, furniture and other manufacturing sub-sector indicating stable conditions (trend). Sub-sectors that provide manufactured goods for civil engineering, residential, and commercial construction projects continue to report very strong levels of activity.
Drought conditions are now having an adverse impact on manufacturers linked to the agricultural sector, particularly those operating in the food and beverages, metals and machinery and equipment sub-sectors.
The PMI accords with the ABS’ quarterly employment report, released last week, which showed a rebound in manufacturing employment; albeit from highly depressed levels:
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
