Australian PMI: Manufacturing ends 2017 on a high

Australian PMI: Manufacturing ends 2017 on a high

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) ended 2017 on a high with a reading of 56.2 in December, down a slight 1.1 on the previous month, and further building on the recovery the sector has experienced over the year.

All seven activity sub-indexes in the Australian PMI expanded in December (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase). Production, stocks (inventories) and supplier deliveries expanded at an accelerated pace while new orders, employment, exports and sales all moderated.

Six of the eight manufacturing sub-sectors expanded in December (according trend data), led by the very large food & beverages sub-sector which recorded its highest monthly result since April 2016 (63.2 points). While still expanding, the non-metallic mineral products (55.7 points) and machinery & equipment (55.4 points) sub-sectors both recorded their lowest index results for 2017 in December, as did wood & paper products, which slipped 3.5 points to move back into contraction (47.2 points).

The input prices sub-index dropped 5.6 points from November’s six-year high to 70.8 points in December, while wages also fell from a five-year high, dropping 3.9 points to 60.2. In particular, manufacturers continue to report difficulties accommodating recently elevated energy costs. The selling prices sub-index ticked up by 0.8 points to 53.4 in December, signaling that some manufacturers have been able to pass on these cost increases to their customers.

“December marked the 15th consecutive month of expanding or stable conditions in the manufacturing sector and adds to the confidence and momentum that has been building over the past year,” said Ai Group Chief Executive Innes Willox. “The healthy Australian PMI reading of 56.2 is all the more impressive given the headwinds of the closure of auto assembly, high energy prices and growing skills shortages which have marked 2017. Manufacturers will be looking to the new year for the progress on the National Energy Guarantee and other measures to put downward pressure on business costs.”