The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by 2.5 points to 58.7 in January, indicating faster growth than at the end of 2017 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

January marked a 16th month of expanding or stable conditions for the Australian PMI – the longest run of expansion since 2005. For the third consecutive month all seven activity sub-indexes in the Australian PMI expanded, with six accelerating their pace of growth.

Five of the eight manufacturing sub-sectors expanded in January (according to trend data), led by the very large food & beverages sub-sector (61.4 points). Large differences in conditions were evident, with the petroleum, coal & chemicals sub-sector recording its highest monthly result in almost a decade (67.9 points) while the textiles & clothing sub-sector recorded its lowest monthly result in a similar timeframe (33.5 points).

The input prices (down 1.1 points to 69.7) and wages (down 1.1 points to 59.1) sub-indexes continued to recede from November’s historic highs, while the selling prices sub-index indicated mild price reductions in January (down 4.2 points to 49.2). Manufacturers continue to report difficulties accommodating recently elevated energy costs.

“Australia’s manufacturing industry enjoyed a strong start to the year and added to the longest manufacturing expansion in more than a decade,” said Ai Group Chief Executive Innes Willox. “Food & beverage producers led the way supported by strong showings from businesses in the petroleum, coal & chemicals; metal products; and machinery & equipment sub-sectors.

“While production and sales volumes were robust and employment also grew, the combination of cost pressures – notably energy costs – and strong competition in part due to the recent rise in the value of the Australian dollar, continued to keep margins tight and restrain wage rises. Now is the opportunity for policy makers to reinforce the optimistic start to the year to secure further investment and employment gains in 2018.”