Manufacturing sectors: Five of the eight sectors in the Australian PMI® expanded in November and three were broadly stable (trend). Growth was led by the printing & recorded media, food & beverages and non-metallic minerals (mainly building and construction-related products) sectors. The large metals and machinery & equipment sectors reported buoyant conditions at the start of the year but have been slowing in the past six months to be broadly stable in November.
Manufacturing wages and prices: The input price index rose again in November and has had readings above 70 points for six of the last seven months. Input prices remain elevated for energy-intensive sectors, reflecting their ongoing problems with high input costs for gas and electricity. Food and beverage manufacturers reported higher prices for raw agricultural inputs and some quality issues due to the drought. The selling prices index fell in November indicating smaller price increases on average for manufacturing customers compared to October. The average wage index fell below its historical average in November, indicating that fewer manufacturing businesses lifted wages than in the preceding months.
Manufacturing activity: Five of the seven activity indexes in the Australian PMI® expanded in November and employment was broadly stable. The new orders index fell into contraction for the first time since September 2016 at 48.7 points in November. This suggests tougher conditions ahead for manufacturers in some sectors. Capacity utilisation remains above its long-run average, suggesting that increases in capital investment may soon be required.
Manufacturing highlights: Manufacturers reported expanding, albeit slowing conditions in November. Food and beverages manufacturers reported higher production in the lead up to Christmas, while respondents in other sectors reported high levels of activity related to infrastructure and construction projects, particularly in Victoria.
Manufacturing concerns: More manufacturing businesses reported deteriorating conditions in November which was reflected by the new orders index falling into contraction.
Manufacturing conditions were stronger in Victoria and South Australia but fell into contraction in New South Wales and Queensland. Drought conditions in New South Wales and Queensland are now having an adverse impact on input costs and sales for some manufacturers.
New orders and employment both negative for the first time in two years. The housing crash slowdown has begun. Full report.
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.
