Australian PMI® - Manufacturing holds positive territory in January

1 February 2012

Manufacturing activity remained in positive territory in January, according to the latest Australian Industry Group - PwC Australian Performance of Manufacturing Index (Australian PMI®). The latest seasonally adjusted index expanded slightly in the month, up 1.4 points to 51.6 (readings above 50 indicate an expansion in activity).

The lift in the overall index to 51.6 was largely due to a rise in the delivery of inputs (55.6) and a rise in inventories of finished goods (54.3) while production (50.7) and new orders (49.9) were broadly unchanged. Across the sub-sectors food and beverages registered the strongest performance (73.8). Textiles recorded the weakest result (37.7) while those sub-sectors linked to construction also performed poorly.

Australian Industry Group Chief Executive, Heather Ridout, said: "Encouragingly, manufacturing held on to positive territory in January to register the second consecutive month of growth, albeit by a slim margin. The growth was underpinned by expansion in key sub-sectors such as food & beverages and transport equipment. At the same time, six of the 12 manufacturing sub-sectors contracted in January highlighting the tough conditions persisting in the sector. Respondents cited ongoing global economic uncertainty and strong overseas competition as factors inhibiting growth in January," Mrs Ridout said.

PwC Partner - Economics and Policy, Jeremy Thorpe, said: "From a macro perspective the Australian PMIĀ® results have improved since a recent low in August 2011. The results for the last quarter may reflect the continuing forces of lower interest rates and the ongoing relatively high Australian dollar. The long term outlook for Australian manufacturers is unpredictable and this is placing further pressure on businesses. It is critical that businesses continue to analyse their business models, look for improvements and make changes where they see gaps," Mr Thorpe said.

Australian PMI® Key Findings for January:

  • The Australian Industry Group - PwC Australian Performance of Manufacturing Index (Australian PMI®) remained in positive territory in January despite ongoing weakness across the sector. The latest seasonally adjusted index was 51.6 in January - a rise of 1.4 points (readings above 50 indicate an expansion in activity).
  • The new orders sub-index (49.9) and production (50.7) both remained broadly unchanged in January - reflecting the uncertainty and cautious outlook noted by respondents.
  • A rise in input deliveries (55.6) and inventories (54.3) helped keep the sector in positive territory.
  • Six of the 12 sub-sectors declined in January - down from seven the previous month.
  • Textiles was the weakest performing sub-sector (37.7) followed by construction materials (39.9). Other sectors linked to construction also performed poorly.
  • Food and beverages was the strongest sub-sector in January (73.8). Another key sub-sector - transport equipment - also performed well (59.1).
  • Wages and input prices continued to rise in the month while selling prices (46.9) were in the red for the 10th straight month.

Background

The Australian Industry Group - PwC Australian Performance of Manufacturing Index (Australian PMI®) is a seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights.

An Australian PMI® reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Australian PMI® results are based on responses from over 200 companies from a rotating sample of manufacturers.

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