Australian PMI: Manufacturing strengthens further in November

The Australian PMI expanded for a fifth month in November, rising 2.3 points to 52.5; readings above 50 indicate expansion in activity, the distance from 50 indicating the strength of the increase. This result continued the longest run of expansionary readings since 2010.

Five of the eight manufacturing sub-sectors expanded (that is, they were above 50 points in three-month moving averages): wood & paper products (up 3.2 points to 67.2); textiles, clothing, footwear, furniture & other (down 4.9 points to 52.0); petroleum, coal, chemical & rubber products (down 0.1 point to 57.4); non-metallic mineral products (up 5.4 points to 58.0); and food & beverages (up 2.7 points to 52.4). However, the machinery and equipment (down 1.9 points to 43.1), metal products (up 0.9 points to 49.0), and very small printing & recorded media (up 1.0 point to 47.6) sub-sectors all remained in contraction.

Of the seven activity sub-indexes, only stocks fell below 50 points (down 3.3 points to 47.6). New orders (up 3.3 points to 53.2) and sales (up 4.5 points to 53.6) returned to expansion after October’s stability. Manufacturing production expanded for a fifth month (up 2.6 points to 53.0) while supplier deliveries (up 3.7 points to 55.0) and exports (up 1.4 points to 56.4) both strengthened further. The manufacturing employment sub-index improved to expansion in November (up 2.4 points to 51.7) after a brief and mild decline in October.

The input prices sub-index decreased by 1.2 points to 67.4 in November, while wages increased a further 2.8 points to 60.5 – this acceleration might suggest demand for labour is stabilising. The manufacturing selling prices sub-index decreased marginally (down 0.6 points to 48.6), signalling a very mild contraction. Manufacturers continue to face strong competition and downward pricing pressures, despite the growing pressure on margins from more expensive imported inputs and wages.

“Improvements in sales, exports, production, new orders and employment underwrote another stronger manufacturing performance in November,” said Ai Group Chief Executive, Innes Willox. “The more positive conditions are due to the more competitive level of the Australian dollar; the considerable cost savings and other efficiencies that manufacturers have introduced over recent years; and continuing strong demand from residential construction businesses. However, areas of weakness remain most notably in the important metals and machinery & equipment sub-sectors, which continue to feel pressures from tough global market conditions and the weakening in Australia of mining investment and automotive assembly.”