Manufacturing edges back into growth in October

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by 1.1 points to 50.9 in October, signalling a very mild expansion across the manufacturing sector (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase).

Ai Group Chief Executive Innes Willox said: “The lift of the Australian PMI into growth territory, while only by the narrowest of margins, is nevertheless positive news after the inventory-related adjustment of a couple of months ago.

“Stronger exports, domestic sales and new orders in October are encouraging although growth remains relatively narrowly based, with contractions in the important metal products and non-metallic minerals subsectors broadly offsetting expansions in the machinery and equipment and the petroleum and chemicals subsectors while the largest manufacturing subsector — food and beverages — trod water in October. The manufacturing sector would welcome the boost to investment that a reduction in the company tax rate would provide — even if it was limited to businesses with annual turnovers of less than $50 million.”

October’s shift to mildly expansionary conditions in the Australian PMI was driven by stronger growth in exports (up 6.0 points to 56.0), sales (up 3.6 points to 55.0) and new orders (up 6.4 points to 54.7).

Three of the eight manufacturing subsectors expanded in October (that is, above 50 points in three-month moving averages): printing and recorded media (down 6.0 points to 56.8), machinery and equipment (up 1.3 points to 54.1), and petroleum and chemical products (up 2.7 points to 55.4).

The food and beverages subsector lost some steam but remained stable (down 2.4 points to 50.4).

The metal products subsector slipped back into negative territory, while textiles and other goods, wood and paper products and non-metallic minerals all moved further into contraction.