Australian PMI shows improving exports due to lower dollar

Posted on 4 Feb 2015 by Tim Brown

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by 2.1 points to 49.0 in January.

But although showing improvement, the sector is still in contraction with a score of less than 50 indicating a reduction in activity.

Manufacturing activity was boosted in part by a lift in manufacturing exports off the back of the lower Australian dollar.

Related article: UK PMI edges higher

Three of the seven activity sub-indexes in the Australian PMI were above 50 points this month with manufacturing exports up for a second consecutive month (up 3.0 points to 54.0), while supplier deliveries (up 4.3 points to 52.9). Stock levels were ip 6.0 points to 51.4, having returned to expansion after contracting in December 2014.

Although the new orders (up 3.9 points to 47.6) and production (up 2.7 points to 48.6) sub-indexes improved in January, they both remained below 50 points. Manufacturing sales contracted for an eighth consecutive month (down 1.1 points to 45.3).

Three of the eight manufacturing sub-sectors expanded in January. The large food, beverages & tobacco sub-sector continued to expand (up 2.5 points to 62.9), as did the smaller textiles, clothing & furniture (up 0.7 points to 59.3) and non-metallic mineral products (up 5.9 points to 68.4) sub-sectors, which both expanded for a third consecutive month.

Ai Group Chief Executive, Innes Willox, said: “While manufacturers opened the new year with reductions in sales, production and new orders, the healthy lift in exports is a welcome sign that the fall in the value of the Australian dollar will be a fillip to the sector over coming months.

“In the meantime, however, the depreciation has also been something of a mixed blessing as it has increased prices for imported inputs including capital equipment. This adverse impact of the lower dollar, together with the loss of sales from the sharp drop in mining investment, the wind down of auto assembly in Australia and generally weak business investment indicate that the headwinds facing the sector will continue well into 2015,” Mr Willox said.