Manufacturing activity continues to grow

The manufacturing sector continued to grow in October, building on modest gains the previous month.

The latest seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) was 1.5 points higher than September at 53.2 (readings above 50 indicate an expansion in activity). 

October’s result was largely driven by improvements in new orders (55.7), production (54.5) and deliveries (54.4). 

AiGroup Chief Executive, Innes Willox, said production expanded for the first time in two and a half years and new orders continued to recover.

“While there are certainly encouraging signs, it is too early to call a recovery with a good share of the gains representing a catch-up following a very slow mid-year period, Mr Willox said.

“The fundamentals facing the sector remain very tough with the domestic currency still a major barrier to export growth and an impediment to businesses seeking to win back market share from imports. In addition, manufacturers’ margins remain under pressure as wage and non-wage costs continue to rise ahead of selling prices.”

Of the sub-sectors – food, beverages and tobacco was the strongest performer (in three monthly moving average terms) at 65.6.

Despite the bright spots, manufacturing exports remain very low with the sub-index at 34.1 and employment across the sector continued to contract (48.6).

Metal products (37.7), machinery and equipment (41.9) and textiles, clothing, footwear, furniture and other manufacturing (38.0) all continued to contract for the three months to October.