Manufacturing broadly stable in October – AIG


Australia’s manufacturing activity has increased slightly in October, with production, new orders and stocks all pointing to a mild expansion in conditions, while exports also improved partly due to a weaker local currency.

Image credit: Freedigitalphotos user: by pong
Image credit: Freedigitalphotos user: by pong

The Australian Industry Group’s (AIG) Performance of Manufacturing Index (PMI) rose by 2.9 points to 49.4 in October, just under the 50 level that marks the threshold between contraction and expansion.

Three of the five sub-indexes – production, new orders and stocks – moved above 50 points (to 51.1, 51.1 and 50.8, respectively), whereas manufacturing exports also increased marginally (up 5.3 points to 50.8), mainly due to the dollar’s recent depreciation.

The large food, beverages & tobacco (56.7 points) and the smaller wood & paper products (59.5 points) were once again the only sub-sectors of the eight manufacturing sub-sectors to expand this month.

The machinery and equipment, the petroleum, coal, chemicals and rubber products and the non-metallic mineral products sub-sectors all continued to contract this month, as did the very large metal products sub-sector.

The employment sub-index, however, eased 1.5 points to 47.5 points. Its 6-month moving average suggested annual growth in the manufacturing employment trend is likely to remain slightly negative over the remainder of 2014.

“The slide in manufacturing activity we have seen for the past couple of months has eased, with the sector broadly stable in October. However, conditions remain patchy within the manufacturing sector with considerable differences between sub-sectors and with production and new orders lifting, whereas employment fell further during the month,” said Australian Industry Group Chief Executive, Innes Willox.

“Respondents to the Australian PMI® indicated that despite the fall in the Australian dollar since early September, it remains relatively high and import competition remains intense. More generally, businesses remain cautious and hesitant about undertaking the investments needed to underwrite future productivity and employment growth.”