Australian Performance Index Records Two Years Of Expansion in Manufacturing

Australian Performance Index Records Two Years Of Expansion in Manufacturing

The Australian Industry Group (Ai Group) Australian Performance of Manufacturing Index (Australian PMI) increased by 2.3% to 59 in September, showing faster growth in the sector, and representing two years of continuous expansion.

The PMI, showed growth almost across the board, with slight dips occurring in Sales, Supplier Deliveries, and Selling Prices.

The Australian PMI has indicated positive conditions (results greater than 50 points) for 24 consecutive months, the longest run of unbroken expansion since 2005.

Five activity sub-indexes accelerated, with the New Orders sub-index reaching a six-month high.

Ai Group chief executive Innes Willox says the food and beverages sub-sector has been the standout result in the milestone, supported by construction-related metallic mineral products, as well as metal products, machinery and equipment, and to a lesser extent, chemicals.

“The benefits of this expansion have been widely distributed with a healthy rate of employment growth over the past year and very strong signs of wages growth over the past three months following a more gradual pace of increase in the preceding few years,” Willox says.

“The signs are good for the immediate outlook also with exports, production, employment and new orders all in the black and improving on the previous month. Alongside the pick-up in wages, input costs also lifted at a rapid rate and by more than selling prices, continuing the tightness of margins across the sector.”

This also correlated with a rise in wages across manufacturing. The average wages sub-index continued to rise in September, increasing by 4.6 points to a record high of 69.3 points. This indicates a higher proportion of businesses are facing wage increases across manufacturing. The average wages sub-index has accelerated above the long-run average of 59.1 points in the last three months.

Other pleasing results include the capacity utilisation, rising by 1.4% to 78.9% overall.

Recovery in coal, petroleum, and chemicals sub-sectors was slow due to rising oil prices. It ended September with an index of 50.5.

Australia’s PMI rates highest out of the developed nations, with the US Flash PMI recording a modest increase and an overall index of 55.6 points. The Eurozone, UK, and Chinese PMI all fell. The Japan Flash PMI increased, reaching 52.9 points.

The Australian PMI, according to Ai Group, “is a national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights.”