Australian Industry Group Performance of Manufacturing index

Comes in at 49.8

  • prior was 46.9, down 9.5 points on the month and the biggest drop ever for this survey

Some key points from AiG:

  • The stabilisation in the Australian PMI in September was heavily influenced by activity in the food & beverages sub-sector which recovered after contracting in August. This key sector (now contributing around 28% of all manufacturing output) appears to have addressed the factors that drove a contraction in production and sales in August
  • Three of the seven activity sub-indexes expanded in September after contracting in August. Production (52.6 points), deliveries (56.4 points) and sales (51.4 points) expanded and exports stabilised (50.0 points). Employment (46.7 points) and stocks (44.3 points) contracted again. New orders slipped into contraction (48.3 points).
  • Five of the eight manufacturing sub-sectors expanded in September (three month moving averages), including printing & recorded media (62.8 points), petroleum & chemical products (52.7 points), metal products (51.3 points), food & beverages (52.8 points) and machinery & equipment (52.8 points).
  • Comments from manufacturers in September indicate a steady improvement in demand and exports in some sectors after last month's dip
  • Variability in the exchange rate and persisting oversupply in some markets is curbing activity
  • Margin pressures appear to be intensifying due to ongoing high input costs (particularly for imported inputs and energy)
  • Lower government orders, the sharp fall-off in mining construction work and the completion of major infrastructure projects (with no imminent replacement projects in the pipeline) and wet weather in some locations has also dampened activity

While you're reading those, take note of the ongoing high input costs (particularly for imported inputs and energy). The higher cost for imported goods should see inflation higher in coming quarters - this is what the Reserve Bank of Australia is expecting anyway. Given the most recent rate cuts have been due to low inflation, this factor may well be diminishing and also the possibility of a further rate cut for the foreseeable future.

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ps. ICYMI over the weekend: China Manufacturing PMI (September): 50.4 (expected 50.5, prior 50.4)

Oh, and ICYMthisaswell - China is on holiday this week, Golden Week. Markets closed