Australian PMI: Manufacturing expansion continues into June

Importantly, the large machinery & equipment sub-sector increased by 0.2 points to 60.1 in June – its highest monthly result since the current sub-index commenced in 2009 (all sub-sector indexes are reported in trend terms). As in the previous two months, seven of the eight manufacturing sub-sectors expanded strongly, with all but the textiles, clothing, furniture & other manufacturing sub-sector (down a further 4.7 points to an historic low of 29.2) exceeding 54 points.

“The manufacturing sector closed the financial year by extending its unbroken expansionary run to nine months,” said Ai Group Chief Executive Innes Willox. “Sales, exports and production all lifted and growth was widespread across the sector. Higher activity in the metal products; machinery & equipment; petroleum, coal, chemical & rubber products; and non-metallic mineral products sub-sectors augmented the further growth of the large food & beverages sub-sector.”

Five of the seven activity sub-indexes in the Australian PMI expanded in June, with new orders strengthening (up 1.4 points to 59.5) as sales surged (up 6.5 points to 60.9). Readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase. The input prices sub-index increased by 1.1 points to 64.9 in June, while wages dropped a point but remained elevated at 60.4 points. The selling prices sub-index plummeted 9.1 points to 47.1, ending a rare five months of price increases and adding further pressure to manufacturers’ margins.

“While a lift in new orders indicates that momentum may continue in the near-term, concerns about the impacts of further rises in energy prices are accumulating like storm clouds over the sector and particularly for more energy-intensive industries,” Willox added. “With policy uncertainties inhibiting investment in energy and in energy-using sectors, it is imperative that sensible and bipartisan resolution be reached as soon as possible.”