Australian Manufacturing surges in August: Ai Group

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Australian Industry Group (Ai Group) recently reported a surge in domestic manufacturing, with the nation’s Performance of Manufacturing Index (PMI) reporting six of its seven activity sub-indexes expanding last month, with production (up 2.4 points to 61.4) and new orders (up 8.5 points to 64.3) especially strong.

Commenting on the report, Ai Group Chief Executive, Innes Willox, said: “A particularly strong showing by the non-metallic mineral products sub-sector reflects its close links with the building and construction industry buoyed by investment in infrastructure, a lift in commercial building and solid levels of activity in residential building.

“[However] energy prices and the uncertainty around energy policy are inhibiting investment and causing grave concern particularly among the more energy-intensive segments of the industry.”

Key Findings from the report:

·        Robust expansion in inventories (up 9.9 points to 58.9) rather than sales (down 4.9 points to 50.9) suggests current activity is geared towards future orders and stockpiling rather than for immediate delivery.

·        Seven of the eight manufacturing sub-sectors expanded in August, led by non-metallic mineral products (up 3.5 points to 72.3 – its highest monthly level since this sub-series commenced in 2009) and wood & paper products (up 1.7 points to 71.1). This reflected local demand from the building and food manufacturing/processing (packaged products) industries.

·        Input prices sub-index fell 6.4 points to 62.9 but remains elevated, with energy costs of great concern to manufacturers. The recent lift in the dollar is dampening imported input prices but also dampening export sales. Exports paused this month (49.3 points) after growing well for the past year.

·        Selling prices sub-index increased by 2.9 points to 53.7 in August, with some manufacturers stating improvement in their ability to raise selling prices to cover some of their rising input costs.