Australian PMI: Manufacturing growth eases back in October

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The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) dropped by 3.1 points to 51.6 in October due to diminished performance from the building products, metals and paper & printing manufacturing sectors.

The broader industry’s flagging growth was offset by an earlier-than-usual pre-Christmas boom in the food & beverage sector as well as strong contributions from businesses in the chemicals and machinery & equipment sectors.

According to Ai Group’s report, three of the six manufacturing sectors in the Australian PMI expanded in October, led by food & beverages (up 1.3 points to 61.8) and machinery & equipment (up 0.2 points to 54.2). The chemicals sector (down 0.7 points to 52.0) also expanded, albeit at a slower pace in October.

The metal products (up 1.5 points to 43.5), building materials, wood & other manufacturing (down 3.4 points to 48.5) and TCF, paper & printing (up 1.1 points to 43.8) sectors all contracted, as did the selling prices index (dropped by 3.9 points to 45.0 in October ) which posted its lowest result since December 2018.

Five of the seven activity indexes in the Australian PMI indicated expanding conditions in October, with the exports index rising back into expansion (up 2.2 points to 51.8) on the back of increased demand from the United States.

The survey also found that the input prices index climbed further on top of September’s 2019 high (up 2.8 points to 74.7), with some respondents noting higher prices for imported inputs because of the lower trading range of the Australian dollar.

The average wages index fell by 4.5 points to 59.3, indicating a lower proportion of businesses are facing wage pressures.

Commenting on these findings, Ai Group Chief Executive Innes Willox said:

“The broader manufacturing sector expanded in October with strong contributions from businesses in the food & beverage, chemicals and machinery & equipment sectors. Growth in these sectors was sufficient to offset further weakness among building products, metals and TCF, paper & printing manufacturers,” Mr Willox said.

“The overall pace of expansion weakened with a slower rise in employment, and a contraction in new orders overshadowing rises in sales and production. Weakness in construction was clearly a factor dampening conditions in the metals and building products sectors while continuing strength in mining assisted the machinery & equipment and chemicals sectors.

“There are indications of a bring-forward of Christmas-related sales. This, together with a slight decline in new orders will have manufacturers wary about the sector-wide performance in the coming months,” he concluded.

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