Australian PMI: Manufacturing recovery strengthens in February

Six of the seven activity indices in the Australian PMI expanded in February (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion). Only the stocks (inventories) index contracted (down 5.6 points to 48.0), perhaps because of buoyant sales in the month (up 15.7 points to 62.2). Production, sales, employment and new orders all improved from the December and January period, with the new orders index (up 5.3 points to 59.9) indicating further strong production in the coming months.

“Australia’s manufacturers lifted production and employment in February as sales recovered a large share of the ground lost in 2020,” said Ai Group Chief Executive Innes Willox. “Growth was distributed broadly across manufacturing with particular strength among producers of machinery & equipment and chemical products.”

Five of the six manufacturing sectors in the Australian PMI expanded in February, with only the metal products sector reporting mildly negative conditions (down 0.8 points to 48.7).

“The building products sector saw a welcome return to growth on the back of strength in house building and renovations,” Willox continued. “The large food & beverage sector continued to expand while the metal products sector slipped lower in February.”

The input prices index jumped above its long-run average (67.4 points) to record its highest result since October 2019 (up 9.7 points to 74.1), indicating faster input price increases, on average, for manufacturers. Selling prices, meanwhile, increased only slightly (up 0.4 points to 51.2). The average wages index returned to more normal levels in February (up 1.8 points to 58.2) after dropping sharply due to COVID-19 in 2020.

“Manufacturers are generally positive about the outlook for the next few months with new orders coming in at a greater pace as restrictions on activity and cross-border travel are hopefully wound back,” Willox said.