Australian PMI®: Australian manufacturing enters New Year on a high note

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The Australian manufacturing sector ended 2016 on a positive note having registered its third consecutive month of expansion.

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The Ai Group’s performance of manufacturing index (PMI) increased by 1.2 points to 55.4 points in December, signalling a mild expansion across the manufacturing sector.

Chief Executive Innes Willox attributed the growth of the sector to increased activity in sales, production, exports and new orders.

“Despite a small fall in sector-wide employment in December, manufacturing production, sales, exports, and new orders all grew strongly in the month, providing a running start to the New Year. Four of the five larger manufacturing sub-sectors – food & beverages; petroleum, coal, chemicals & rubber products; non-metallic mineral products; and machinery and equipment – saw healthy growth while the metal products sub-sector closed a difficult year in the red,” he said.

“The positive result for producers of machinery & equipment comes despite the steading unwinding of automotive assembly and points to a tentative pick-up in business investment. Early passage of the Government’s Enterprise Tax Plan would provide momentum and an important boost to activity.”

According to Ai Group’s report, six of the seven sub-indexes increased from November, led by a surge in exports (up 12.6 points to 68.5) and strong expansions in new orders (up 1.1 points to 60.6) and sales (up 5.3 points to 58.8).

Employment slipped in December by 4.9 points and now stands at 47.4 points, in line with recently weaker jobs growth.

Five of the eight manufacturing sub-sectors also expanded in December, with food and beverages up 0.6 points to 57.1 and petroleum & chemical products down 0.6 points to 56.5 continuing to perform solidly.

Machinery & equipment increased 0.1 points to 55, while non-metallic mineral products bounced back to expansionary conditions (up 7.1 points to 57.9).

Input prices climbed by 0.3 points to 62.8, while the selling prices sub-index slipped by 6.1 points to a contractionary 45.4, indicating a continued tightening of margins for manufacturers heading into 2017.

The wages sub-index of the Australian PMI® rose by 8.5 points to 62.3, heralding an early 2017 pick-up in manufacturing wages growth.