The Australian Performance of Manufacturing Index (Australian PMI) fell slightly by 0.7 points to 58.3 in October, indicating further expansion but at a marginally slower pace than the previous month.

Compiled by the Australian Industry Group, the latest PMI extended the index’s period of uninterrupted growth to 25 consecutive months – the longest run of recovery or expansion since 2005. Readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase.

For a third consecutive month, all seven activity sub-indexes in the Australian PMI expanded in October. Production (up 2.9 points to 61.6), supplier deliveries (up 3.7 points to 60.9) and sales (up 2.3 points to 59.9) were all encouragingly strong, while employment (down 5.4 points to 52.6), new orders (down 3.8 points to 58.8) and exports (down 3.8 points to 55.1) all slowed in comparison to September.

“The strength of Australia’s manufacturing sector continued into October with production, domestic sales and new orders all growing at encouraging rates,” said Ai Group Chief Executive Innes Willox. “Employment also lifted – although at a slower pace than in September.”

Seven of the eight manufacturing sub-sectors expanded in October (according to trend data), with machinery & equipment the only exception in recording a stable result (down 1.6 points to 49.4). Expansions were strong in the food & beverages (up 0.5 points to 61.2) and wood & paper products (up 2.4 points to 70.7) sub-sectors.

“The positive conditions extend widely across this very diverse sector of the economy with food & beverages – the largest manufacturing sub-sector – leading the way in October,” Willox added. “Other large sub-sectors including metal products, non-metallic minerals and chemicals also contributed to the positive overall reading as did the smaller sub-sectors of wood & paper products and printing & recorded media. The machinery & equipment sector dipped into negative territory as lower sales to rural businesses and higher costs for imported inputs linked with the lower Australian dollar contributed to a weaker performance.”

The input prices sub-index eased back in October (down 5.6 points to 72.8) after rising quickly in the past three months. Ongoing problems with high energy costs and prices for imported components were noted by many manufacturers. The wages sub-index also fell back from September’s record high (down 2.3 points to 67.0). The manufacturing selling price sub-index increased by 0.9 points to 57.1 in October, indicating more widespread price increases for manufacturing customers after years of falling prices.

“While manufacturers are working hard to sustain these robust conditions, the uncertainties hanging over energy prices and energy policy continue to cloud the medium and longer-term outlook – particularly for the more energy-intensive segments of the industry,” Willox concluded. “The economic uncertainty is also impacted by drought, global trade disputes, the fluctuating dollar, declining consumer sentiment, fallout from the Royal Commission on lending, and the looming Federal election.”