JANUARY 2013

AUSTRALIAN PMI
JAN

MANUFACTURING DIPS IN JANUARY

KEY FINDINGS
Manufacturing activity contracted for an 11th consecutive

65 60 55

AUST

40.2

50 45 40 35

Diffusion Index (Points)

EUROZONE PMI

month in January, with the seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) recording a level of 40.2, down from 44.3 one month ago. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease). The contraction in manufacturing new orders worsened, reflecting weak global demand and a softening Australian economy. The new orders sub-index fell 6.3 points to 39.4 in January. The manufacturing production sub-index remained firmly in the red, at 40.4 in January, down by 2.1 points from December. Only the wood & paper products sub-sector expanded in January, while the contraction in the other sub-sectors, except petroleum, coal, chemical and rubber products, eased. Survey respondents remained cautious about the outlook. They cited a range of inhibitors including: soft demand; weak confidence; and the strong Australian dollar. Wages and input costs continued to rise in January, while the decline in selling prices persisted, indicating that the profits for manufacturers remain under pressure.

60 55 50 45
Increasing

DEC

30

DEC

65 60

USA ISM PMI

Decreasing

40 35 30 25 20
Jul 09 Oct 09 Jul 10 Oct 10 Jul 11 Oct 11 July 12 Apr 09 Apr 10 Apr 11 Apr 12 Oct 12 Jan 10 Jan 11 Jan 12 Jan 13

50.7

55 50 45 40 35

USA

NOV

30

Australian PMI

3 month moving average

DEC

65 60 55

EURO

46.1

50 45 40 35

SECTORS
Seasonally adjusted, all manufacturing sub-sectors except for

Decreasing

Increasing

the wood & paper products sub-sector, recorded a contraction in activity in January (that is, index levels were below 50 points). Aside from the petroleum, coal, chemical and rubber products sub-sector, the pace of contraction among the sub-sectors eased in the month.

Food, beverage & tobacco products Textiles, clothing & other manufacturing Wood & paper products Printing & recorded media Petroleum, coal, chemical & rubber products

NOV

30

DEC

65 60

JAPANESE PMI

Non-metallic mineral products Metal products Machinery & equipment Australian PMI

55

10

20

30

40

50

60

70
Jan 13

80

90

100

JAPAN

45.0

50 45 40 35

Diffusion Index

Dec 12

NOV

30

PRODUCTION AND CAPACITY UTILISATION

Production Diffusion Index (Points)

70 65 60 55 50 45 40 35 30 25 20
Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13

80
Capacity Utilisation Capacity Utilisation (%)

Seasonally adjusted, the production sub-index decreased by 2.1

DEC
75

65 60

CHINESE PMI

points to 40.4 in January, in a 10th consecutive month of decline in manufacturing output. Production expanded in only the wood & paper products sub-sector. There were significant declines in production in the textiles, clothing & other manufacturing; printing & recorded media; non-metallic mineral products; metal products; and machinery & equipment sub-sectors. Capacity utilisation for all manufacturers decreased to 71.3% in January (not seasonally adjusted).

51.5

55 50 45 40 35

70

CHINA
65

60

NOV

30

NEW ORDERS AND EXPORTS

In seasonally adjusted terms, the new orders sub-index decreased

65 60 55
Diffusion Index (Points)
Increasing

Apr 09

Jan 10

Apr 10

Jan 11

Apr 11

Jan 12

Apr 12

Oct 09

Oct 10

Oct 11

July 12

Exports

New Orders

The seasonally adjusted employment sub-index decreased

Diffusion Index (Points)

40 35 30 25 20
Apr 09 Jan 10 Apr 10 Jan 11 Apr 11 Jan 12 Apr 12 Oct 09 Oct 10 Oct 11 July 12 Oct 12 Jan 13 Jul 09 Jul 10 Jul 11

Decreasing

4.4 points to 40.1 in January, indicating that manufacturing employment has contracted for the 10th consecutive month. Employment increased in the wood & paper products sub-sector. Although conditions facing manufacturing remain difficult and employment has been falling, strong wages growth continued to be reported by manufacturing businesses in January.

65 60 55 50 45
Employment

Increasing

EMPLOYMENT AND AVERAGE WAGES

75 70

Average Wages

Oct 12

Jan 13

Jul 09

Jul 10

Jul 11

by 6.3 points to 39.4 points in January, bringing the decline in new orders into an 11th consecutive month. Unadjusted, the wood & paper products sub-sector was the only sub-sector to record an increase in new orders, while new orders in the food, beverage & tobacco products sub-sector remained flat. Reflecting weakness in the global economy, the fall in manufacturing exports intensified in January. The exports sub-index dropped 2.1 points to 31.1 in January, marking the 11th consecutive month of contraction and one of the lowest readings for the exports sub-index in this series.

WHAT IS THE AUSTRALIAN PMI?

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) is a seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights. An Australian PMI reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Survey results are based on a rotating sample of manufacturing companies eachmonth. More information can be obtained from the Ai Group website www.aigroup.com.au.

50 45
Decreasing

40 35 30 25 20 15

CONTACT
Innes Willox Chief Executive Ai Group Tel 03 9867 0111
Increasing

FINISHED STOCKS AND DELIVERIES

Manufacturing inventories contracted again in January, with a

65 60
Diffusion Index (Points)

Jul 09

Oct 09

Jul 10

Oct 10

Jul 11

Oct 11

July 12

Apr 09

Apr 10

Apr 11

Apr 12

Oct 12

Jan 10

Jan 11

Jan 12

Deliveries

Finished Stocks

INPUT COSTS AND SELLING PRICES

The increase in input costs slowed again in January, with the

90 80
Diffusion Index (Points)

Jan 13

fall in this sub-index to 35.2 points in January compared with 39.5 points in December (seasonally adjusted). Inventories decreased in all sub-sectors, except in non-metallic mineral products. The drop in inventories was most significant in the food, beverage & tobacco sub-sector. Supplier deliveries contracted for an 11th consecutive month in January. The rate of decline intensified as the sub-index decreased by 1.9 points to 45.3 in January. Among the sub-sectors, only the wood & paper products sub-sector recorded an increase in supplier deliveries.

55 50 45 40 35 30

INTERNATIONAL PMI DATA

Decreasing

Markit Economics www.markiteconomics.com

seasonally adjusted sub-index falling 2.1 points to 58.5. While rising at a slower pace, continuing increases in input costs were recorded in most sub-sectors. Selling prices continued to fall in January. The selling prices sub-index decreased 3.0 points to 40.0. This falling trend in selling prices indicates that widespread price discounting is probably still occurring, as manufacturers seek to compete globally in a very weak demand environment.

70 60 50

Decreasing

40 30 20
Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13

Increasing

CIPS Australia www.cipsa.com.au

Input prices

Selling prices

The Australian Industry Group, 2012 This publication is copyright. Apart from any fair dealing for the purposes of private study or research permitted under applicable copyright legislation, no part may be reproduced by any process or means without the prior written permission of The Australian Industry Group. Disclaimer The Australian Industry Group provides information services to its members and others, which include economic and industry policy and forecasting services. None of the information provided here is represented or implied to be legal, accounting, financial or investment advice and does not constitute financial product advice. The Australian Industry Group does not invite and does not expect any person to act or rely on any statement, opinion, representation or interference expressed or implied in this publication. All readers must make their own enquiries and obtain their own professional advice in relation to any issue or matter referred to herein before making any financial or other decision. The Australian Industry Group accepts no responsibility for any act or omission by any person relying in whole or in part upon the contents of this publication.
AIG12599

AUSTRALIAN PMI
AUSTRALIAN PMI PRODUCTION EMPLOYMENT NEW ORDERS INVENTORIES SUPPLIER DELIVERIES INPUT PRICES EXPORTS SELLING PRICES AVERAGE WAGES CAPACITY UTILISATION (%)

Jan 13 40.2 40.4 40.1 39.4 35.2 45.3 58.5 31.1 40.0 60.0 71.3

Dec 12 44.3 42.5 44.5 45.7 39.5 47.2 60.6 33.2 43.0 56.6 73.2

Monthly Change -4.1 -2.1 -4.4 -6.3 -4.3 -1.9 -2.1 -2.1 -3.0 3.4 -1.9pts

Direction Contracting Contracting Contracting Contracting Contracting Contracting Expanding Contracting Contracting Expanding Decrease

Rate of Change Faster Faster Faster Faster Faster Faster Slower Faster Faster Slower -

Trend** (Months) 11 10 10 11 4 10 128 11 22 45

Further Information Results are based on responses from around 200 companies from a rotating sample of manufacturers. An evaluation of the Australian PMI as well as other economic research and analysis can be obtained from the Ai Group website at http://www.aigroup.com.au/economics. Results for capacity utilisation, average wages and output prices to June 2007 based on quarterly surveys. From this point data will be collected in the monthly PMI survey. ** Number of months moving in current direction. New monthly seasonal adjustment factors were applied in April 2012. New industry classification applied from December 2012 (and back-dated) based on the ANZSIC 2006 coding system and 2011-12 weights. Visit http://www.aigroup.com.au/economics for further economic analysis and information.