The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) fell by 5.6 points to 54.2 in September, indicating a deceleration in growth after August’s spike to a 15-year high (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

September marked a 12th consecutive month of expansion for the Australian PMI and the longest run of expansion since 2007. All seven activity sub-indexes in the Australian PMI expanded or were stable in September. Exports recovered from August’s mild contraction, while all other sub-indexes expanded, but at a slower rate than in August. All eight manufacturing sub-sectors also expanded in September (according to trend data) led by non-metallic mineral products, which hit a new record high (up 1.5 points to 75.5). Other large sub-sectors grew at a decelerating pace this month.

“This year’s recovery in manufacturing activity is continuing, but the September Australian PMI suggests that conditions are moderating and growth is decelerating,” said Ai Group Chief Executive, Innes Willox. “Positive sources of local demand for manufacturers in September included apartment and infrastructure construction; mining and agricultural equipment; renewables and utilities. Respondents also reported a rare spike in exports of construction-related products for emergency relief and reconstruction in the US following recent hurricane damage. Last orders are now underway for suppliers of components to Australian auto assembly and the final impacts of this on the manufacturing sector overall will be more evident by year’s end.”

The input prices sub-index rose by 2.9 points to 65.8 in September – close to its 12-month average. The wages sub-index also climbed a further 2.2 points to 61.2. The selling prices sub-index fell by 4.4 points to 49.3 in September, indicating stable pricing after some sporadic price rises in previous months. The pressure on manufacturers’ margins continues.

“Of great concern to all manufacturers continues to be the impact of energy and gas prices on their bottom line” Willox added. “Mounting energy costs are further squeezing already-fragile profitability.”