FEBRUARY 2012

AUSTRALIAN PMI
FEB

MANUFACTURING EXPANSION CONTINUES IN FEBRUARY

KEY FINDINGS
!" Manufacturing activity increased again in February, albeit at a

65 60

51.3

55 50 45 40 35

!"

!"

!"

!"

slightly slower pace than a month ago. The seasonally adjusted Australian Industry Group-PwC Australian PMI fell 0.3 points to 51.3. (Readings above 50 indicate an expansion in activity with the distance from 50 indicative of the strength of the increase.) The increase in manufacturing activity was largely attributed to significant expansions in the clothing and footwear and transport equipment sub-sectors, which more than offset considerable contractions in the wood products and furniture; paper, printing and publishing; fabricated metals; and miscellaneous manufactures sub-sectors. While new orders picked up in February, survey respondents remained cautious about the outlook, citing softer demand, the strong Australian dollar, the impending carbon tax and import competition. Wages and input costs continued to rise in February, while the decline in selling prices persisted, pointing to a narrowing of manufacturing profit margins. Western Australia recorded the strongest expansion in manufacturing activity.

55 50

Increasing

60

JAN

30

JAN
Diffusion Index (Points)

65 60 55 50 45 40 35

45 40
Decreasing

35 30 25 20
April 09 April 10 April 08 April 11 July 08 July 09 July 10 July 11 Nov 11 Feb 12 Jan 09 Jan 10 Oct 08 Oct 09 Oct 10 Jan 11

USA ISM PMI

54.1

DEC

30

Australian PMI

3 month moving average

JAN

65 60

EUROZONE PMI

48.8

55 50 45 40 35

SECTORS
!" Seasonally adjusted, six out of the 12 manufacturing sub-sectors
Food and beverages Textiles Clothing and footwear Wood products and furniture Paper, printing and publishing Chemicals, petroleum, coal Construction materials Basic metals Fabricated metals Transport equipment Miscellaneous TOTAL Machinery and equipment

Decreasing

Increasing

JAPANESE PMI

recorded increases in activity in February, unchanged from January. !" The clothing and footwear sub-sector recorded the strongest growth in the month, followed by the transport equipment sub-sector, which benefitted from strong demand from the mining sector. The basic metals and textiles sub-sectors moved into expansionary territory during February. !" The wood products and furniture; paper, printing and publishing; fabricated metals; and miscellaneous manufactures sub-sectors recorded the strongest contractions during February. The construction materials sub-sector remained in negative territory.

DEC

30

JAN

65 60

10

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100

50.7

55 50 45 40 35

Diffusion Index

January 12

February 12

PRODUCTION AND CAPACITY UTILISATION

Production Diffusion Index (Points)

70 65 60 55 50 45 40 35 30 25 20

80 Capacity Utilisation Capacity Utilisation % 75

!" Seasonally adjusted, the production sub-index rose 1.0 point

DEC

65

CHINESE PMI

to 51.7, indicating that manufacturing output increased in February. !" The result for manufacturing output reflected significant increases in production in the basic metals and transport equipment sub-sectors. !" On an unadjusted basis, nine sub-sectors reported declines in production in February, up from seven sub-sectors in January. !" Overall, capacity utilisation in February fell to 73.2%.

30

70

JAN

65 60

48.8

55 50 45 40 35

May 08

May 09

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Nov 08

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Feb 12

60

Supported by:
www.markiteconomics.com

DEC JULY

30

Average Wages Diffusion Index (Points) Average Wages Diffusion Index (Points) Average Wages Diffusion Index Average Wages Diffusion Index (Points)(Points)

May 08 May 08 May 08 May 08 Aug 08 Aug 08 Aug 08 Aug 08 Nov 08 Nov 08 Nov 08 Nov 08 Feb 09 Feb 09 Feb 09 Feb 09 May 09 May 09 May 09 May 09 Aug 09 Aug 09 Aug 09 Aug 09 Nov 09 Nov 09 Nov 09 Nov 09 Feb 10 Feb 10 Feb 10 Feb 10 May 10 May 10 May 10 May 10 Aug 10 Aug 10 Aug 10 Aug 10 Nov 10 Nov 10 Nov 10 Nov 10 Feb 11 Feb 11 Feb 11 Feb 11 May 11 May 11 May 11 May 11 Aug 11 Aug 11 Aug 11 Aug 11 Nov 11 Nov 11 Nov 11 Nov 11 Feb 12 Feb 12 Feb 12 Feb 12

75 EMPLOYMENT AND AVERAGE WAGES 75 70 70 75 75 7565 !" The seasonally adjusted employment sub-index decreased 75 65 75 7075 1.0 point to 50.0 in February, indicating that manufacturing 70 7060 70 60 70 6570 employment remained flat in the month having experienced a 65 6555 65 55 65 6065 60 6050 60 50 60 5560 mild expansion in January. 55 5545 55 45 55 5055!" Decreases in employment were recorded in the food and 50 5040 50 40 50 4550 beverages; wood products and furniture; chemicals, petroleum 45 4545 45 35 4045 and coal products; fabricated metals; machinery and 40 4035 40 40 40 30 30 35 35 3525 35 25 equipment; and miscellaneous manufactures sub-sectors. 35 3035 30 3020 !" Wages growth in the manufacturing sector continued, with the 30 20 30 2530 25 2525 25 2025 wages sub-index down 3.7 points to 57.0 in February. 20 2020 20 20
Employment Employment Employment Employment

May 08 May 08 May 08 May 08 Aug 08 Aug 08 Aug 08 Aug 08 Nov 08 Nov 08 Nov 08 Nov 08 Feb 09 Feb 09 Feb 09 Feb 09 May 09 May 09 May 09 May 09 Aug 09 Aug 09 Aug 09 Aug 09 Nov 09 Nov 09 Nov 09 Nov 09 Feb 10 Feb 10 Feb 10 Feb 10 May 10 May 10 May 10 May 10 Aug 10 Aug 10 Aug 10 Aug 10 Nov 10 Nov 10 Nov 10 Nov 10 Feb 11 Feb 11 Feb 11 Feb 11 May 11 May 11 May 11 May 11 Aug 11 Aug 11 Aug 11 Aug 11 Nov 11 Nov 11 Nov 11 Nov 11 Feb 12 Feb 12 Feb 12 Feb 12

70 60.0 65 70 7055.5NEW ORDERS 70 60 60.0 65 60.0 !" In seasonally adjusted terms, the new orders sub-index rose by 6551.0 60.0 65 55 1.8 points to 51.7 in February. This was the first increase in the 55.5 60 55.5 6046.5 55.5 60 50 51.0 55 51.0 5542.0 new orders sub-index in eight months after slumping in the 51.0 55 45 46.5 50 46.5 5037.5 middle of 2011 and spending the second half of the year in 46.5 50 40 42.0 45 42.0 4533.0 negative territory. 42.0 45 35 37.5 40 37.5 4028.5!" Unadjusted, new orders increased in five of the 12 sub-sectors. 37.5 40 30 33.0 35 33.0 3524.0!" The transport equipment; textiles; and clothing and footwear 33.0 35 25 28.5 30 28.5 3019.5 sub-sectors recorded significant increases in new orders. 28.5 30 20 24.0 25 24.0 2515.0!" On the other hand, new orders decreased significantly in the 24.0 25 15 19.5 20 19.5 2019.5 20 15.0 15 15.0 1515.0 paper, printing and publishing and fabricated metals sub-sectors. 15
New Orders New Orders New New Orders Orders

70 65 70 70 70 60 65 65 65 55 60 60 60 50 55 55 55 45 50 50 50 40 45 45 45 35 40 40 40 30 35 35 35 25 30 30 30 20 25 25 25 15 20 20 20 15 15 15

Increasing Increasing Increasing Increasing

Diffusion Index (Points) Diffusion Index (Points) Diffusion Index Diffusion Index (Points)(Points)

WHAT IS THE AUSTRALIAN PMI?

The Australian Industry Group - PwC 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 each month. More information can be obtained from the Ai Group website www.aigroup.com.au.

70 75 75 65 75 70 70 60 70 65 65 55 65 60 60 50 60 55 55 45 55 50 50 40 50 45 45 35 45 40 40 30 40 35 35 25 35 30 30 20 30 25 25 25 20 20 20

Average Wages Average Wages Average Wages Average Wages

Employment Employment Employment Employment

70 75 75 65 75 70 70 60 70 65 65 55 65 60 60 50 60 55 55 45 55 50 50 40 50 45 45 35 45 40 40 30 40 35 35 25 35 30 30 20 30 25 25 25 20 20 20

Employment Diffusion Index (Points) Employment Diffusion Index (Points) Employment Diffusion Index Employment Diffusion Index (Points)(Points)

75

Decreasing Decreasing Decreasing Decreasing

75

SPONSOR STATEMENT
PwC is delighted to be associated with the Survey of Australian Manufacturing and the Australian Industry Group. This association brings together the significant experience and expertise of Australias leading industry body and the largest business adviser to the manufacturing sector. We look forward to continuing our association with the Australian Industry Group and its members, and to playing our part in the ongoing development of Australian manufacturing.

60 65

FINISHED STOCKS
!" Manufacturing inventories increased slightly in February, with
Diffusion Index (Points) Diffusion Index (Points) Diffusion Index Diffusion Index (Points)(Points)

65 65 65 60 65 60 60 55 60 55 55 50 55 50 50 45 50 45 45 40 45 40 40 35 40 35 35 30 35 30 30 30
Increasing Increasing Increasing Increasing Decreasing Decreasing Decreasing Decreasing

DELIVERIES, INPUT COSTS AND SELLING PRICES

!" In seasonally adjusted terms, supplier deliveries increased in

May 08 May 08 May 08 May 08 Aug 08 Aug 08 Aug 08 Aug 08 Nov 08 Nov 08 Nov 08 Nov 08 Feb 09 Feb 09 Feb 09 Feb 09 May 09 May 09 May 09 May 09 Aug 09 Aug 09 Aug 09 Aug 09 Nov 09 Nov 09 Nov 09 Nov 09 Feb 10 Feb 10 Feb 10 Feb 10 May 10 May 10 May 10 May 10 Aug 10 Aug 10 Aug 10 Aug 10 Nov 10 Nov 10 Nov 10 Nov 10 Feb 11 Feb 11 Feb 11 Feb 11 May 11 May 11 May 11 May 11 Aug 11 Aug 11 Aug 11 Aug 11 Nov 11 Nov 11 Nov 11 Nov 11 Feb 12 Feb 12 Feb 12 Feb 12

60 65 6060 6560 55 65 60 6055 55 5555 50 60 55 5550!" 50 55 5050 45 50 5045 50 45 4545 40 45 4540 45 40 4040 35 40 4035 40 35 3535 35 30 3535 30 3030

Finished Stocks Finished Stocks Finished Finished Stocks Stocks

the seasonally adjusted sub-index falling 3.2 points to 51.1, above the 50-point level. Inventories increased most strongly in the clothing and footwear; transport equipment; and textiles sub-sectors.

50 50 40 50 40 40 30 40 30 30 20 30 20 20 20

May 08 May 08 May 08 May 08 Aug 08 Aug 08 Aug 08 Aug 08 Nov 08 Nov 08 Nov 08 Nov 08 Feb 09 Feb 09 Feb 09 Feb 09 May 09 May 09 May 09 May 09 Aug 09 Aug 09 Aug 09 Aug 09 Nov 09 Nov 09 Nov 09 Nov 09 Feb 10 Feb 10 Feb 10 Feb 10 May 10 May 10 May 10 May 10 Aug 10 Aug 10 Aug 10 Aug 10 Nov 10 Nov 10 Nov 10 Nov 10 Feb 11 Feb 11 Feb 11 Feb 11 May 11 May 11 May 11 May 11 Aug 11 Aug 11 Aug 11 Aug 11 Nov 11 Nov 11 Nov 11 Nov 11 Feb 12 Feb 12 Feb 12 Feb 12 Decreasing Decreasing Decreasing Decreasing

February, with the sub-index falling by 3.8 points to 51.8. !" Unadjusted, deliveries rose in five sub-sectors, with the textiles and transport equipment sub-sectors recording significant increases. !" The increase in input costs persisted in February, with the seasonally adjusted sub-index rising 1.2 points to 60.1. With the exception of the food and beverage and clothing and footwear sub-sectors, all other sub-sectors recorded increases in input costs. !" Selling prices decreased in February, with the selling prices sub-index increasing 1.3 points to 48.2.
Deliveries Input Deliveries Input Deliveries Deliveries Input Input

90 90 90 80 90 80 80 70 80 70 70 60 70 60 60 50 60

CONTACT
Increasing Increasing Increasing Increasing

Diffusion Index (Points) Diffusion Index (Points) Diffusion Index Diffusion Index (Points)(Points)

Innes Willox Chief Executive Designate Ai Group Tel 02 6233 0712

Markit Economics www.markiteconomics.com

Deliveries

Input Prices

Average Selling Prices

Deliveries Deliveries Deliveries

Input Prices Input Prices Input Prices

Average Selling Prices Average Selling Prices Average Selling Prices

AUSTRALIAN PMI
February 2012 AUSTRALIAN PMI 51.3 PRODUCTION 51.7 EMPLOYMENT 50.0 NEW ORDERS 51.7 INVENTORIES 51.1 SUPPLIER DELIVERIES 51.8 INPUT PRICES 60.1 EXPORTS 59.7 SELLING PRICES 48.2 AVERAGE WAGES 57.0 CAPACITY UTILISATION (%) 73.2

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, nancial or investment advice and does not constitute nancial 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 Transport equipment herein before making any nancial or Transport equipment Transport equipment Miscellaneous other decision. The Australian Industry Machinery and equipment Machinery and equipment evaluation of the Australian PMI as well as Further Information Results are based on responses from over 200 companies from a rotating sample of manufacturers. An Machinery and equipment TOTAL Group accepts no responsibility for any Miscellaneous other economic research and analysis can be obtained from the Ai Group website on http://www.aigroup.com.au/economics. Miscellaneous Miscellaneous 0 10 20 30 40 50 60 70 80 90 act or omission by any person relying 100 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. TOTAL TOTAL in whole or in part upon the contents TOTAL February ** Number of months moving in current direction. Diffusion 20 10 20Index 30 40 January 12 70 40 50 50 60 60 70 80 80 90 12 100this publication. 90 100 of 0 0 10 30 New monthly seasonal adjustment factors derived directly from the Australian Bureau of Statistics were applied in April 2011. 0 10 20 30 40 50 60 70 80 90 100 AIG11213 January 12 February 12 Diffusion Index January 12 February 12 Diffusion Index Visit http://www.aigroup.com.au/economics for further economic analysis and information. January 12 February 12

January 2011 51.6 50.7 51.0 49.9 54.3 55.6 58.9 49.4 46.9 60.7 75.5

Monthly Change Direction Rate of Change Trend** (Months) Australian PMI -0.3 Expanding Slower 3 Australian PMI Australian PMI 1.0 Australian PMI Expanding Faster 3 Increasing Decreasing -1.0 Unchanged 1 Increasing Food and beverages From expanding Decreasing Increasing Decreasing Increasing Decreasing 1.8 Expanding Textiles From contracting 1 Food and beverages Food and beverages Food and footwear Clothingand beverages -3.2 ExpandingTextiles Slower 4 Textiles Textiles Wood products and furniture Clothing and footwear -3.8 Paper, Clothing and footwear Expanding Slower 3 Clothing and footwear printing and publishing Wood products and furniture products furniture 1.2 WoodChemicals,andand furniture Expanding coal Faster 117 Wood products petroleum, Paper, printing and publishing Paper, printing and publishing printing and publishing Construction materials 10.3 Paper, Expanding coal From contracting 1 Chemicals, petroleum, Chemicals, petroleum, coal Chemicals, petroleum, coal Basic 1.3 Contracting metals Slower 11 Construction materials Construction materials Construction materials Fabricated metals Basic Basic metals -3.7 Expanding metals Slower 34 TransportBasic metals equipment Fabricated metals Fabricated metals -2.3 pts Decrease metals Fabricated Machinery and equipment

Diffusion Index