®

SEPtEMBEr 2012
AuStrAlIAN PMI®
SEP

MANufACturINg dIPS furtHEr IN SEPtEMBEr
KEy fINdINgS
■ Manufacturing activity contracted in September, as the seasonally

65 60 55

AUST

44.1

50 45 40 35

■ ■

adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) fell 1.2 points to 44.1. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease). Most worryingly for the outlook, the contraction in manufacturing new orders extended into a seventh month. After almost reaching the neutral ‘50 point’ level in August the new orders sub-index fell to 44.3 in September. Manufacturing production remained firmly in contraction, despite a slowing in the rate of decline. The production sub-index increased to 45.5 in September from 43.1 in August. Only the textiles, clothing & footwear and paper, printing & publishing sub-sectors expanded in September. Survey respondents remained cautious about the outlook. They cited a range of inhibitors of activity including: soft demand; the expected downturn in the mining sector; higher utility charges; stronger import competition; and the strong Australian dollar. Wages and input costs continued to rise in September, while the decline in selling prices persisted, indicating that the profits for manufacturers remain under pressure.

60
Increasing

55 50
Diffusion Index (Points)

AUG

30

45
Decreasing

AUG

65 60

40 35 30 25 20
Mar 09 Mar 10 Mar 11 Mar 12 Dec 08 Jun 09 Sep 09 Dec 09 Jun 10 Sep 10 Dec 10 Jun 11 Sep 11 Dec 11 Jun 12 Sep 12

uSA ISM PMI

49.6

55 50 45 40 35

USA

Australian PMI®

3 month moving average

JUL

30

AUG

65 60

EurozoNE PMI

SECtorS
■ Seasonally adjusted activity increased in two sub-sectors in

55

JAPANESE PMI

September, down from three sub-sectors in August. ■ In September, the textiles, clothing & footwear sub-sector expanded moderately while the increase in activity in the paper, printing & publishing sub-sector showed a stronger increase. ■ The three sub-sectors that showed an increase in activity in August all moved into contraction again in September, highlighting the fragility of recovery at the sub-sector level. ■ The basic metals; fabricated metals; and transport equipment sub-sectors recorded strong contractions in activity, with the latter two sub-sectors recording declines that were steeper than in August.

Decreasing

Increasing

EURO

45.1

50 45 40 35

Food & beverages Textiles, clothing & footwear Wood products & furniture Paper, printing & publishing Chemicals, petroleum, etc Construction materials Basic metals Fabricated metals Transport equipment Machinery & equipment Miscellaneous TOTAL

JUL

30

AUG

65 60 55

0

10

20

30

40

50

60

70
Sept 12

80

90

100

47.7

50 45 40 35

Diffusion Index

Aug 12

JAPAN

ProduCtIoN ANd CAPACIty utIlISAtIoN
■ Seasonally adjusted, the production sub-index increased by 2.4

JUL

70 65
Production Diffusion Index (Points)

80

30

CHINESE PMI

points to 45.5 in September, indicating a second consecutive month of moderation in the contraction of manufacturing output. ■ Production expanded in six out of the 11 sub-sectors this month, with the strongest increases reported in the food & beverages; textiles, clothing & footwear; paper, printing & publishing; and miscellaneous manufactures sub-sectors. ■ There were significant declines in production in the construction materials; basic metals; and transport equipment sub-sectors. ■ Capacity utilisation for all manufacturers increased slightly to 73.0% in September.

60 55 50 45 40 35 30 25 20
Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10

Capacity Utilisation Capacity Utilisation (%)

75

AUG

65 60

70

47.6

55 50 45 40 35

65

CHINA

60
Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12

JUL

30

NEW ordErS
■ In seasonally adjusted terms, the new orders sub-index decreased
70
Increasing

Dec 08

Mar 09

Jun 09

Sep 09

Dec 09

Mar 10

Jun 10

Sep 10

Dec 10

Mar 11

Jun 11

Sep 11

Dec 11

Mar 12

Jun 12

EMPloyMENt ANd AvErAgE WAgES
points to 40.7 in September. This was the sixth consecutive month of contracting employment recorded by this sub-index. ■ Employment expanded only in the textiles, clothing & footwear and paper, printing & publishing sub-sectors in September. ■ Employment declined strongly in the construction materials; basic metals; fabricated metals; and transport equipment sub-sectors. ■ Although conditions facing the sector remain difficult and employment has been falling, relatively strong wages growth continued in the manufacturing sector in September.
Average Wages Diffusion Index (Points)

75 70 65 60 55 50 45 40 35 30 25 20
Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11

Average Wages

■ The seasonally adjusted employment sub-index decreased 0.5

Sep 12

by 4.8 points to 44.3 points in September, bringing the decline in new orders into a seventh consecutive month. ■ Unadjusted, new orders expanded in three of the 11 sub-sectors in September, unchanged from August. These expanding sub-sectors included: food & beverages; wood products & furniture; and paper, printing & publishing. ■ In addition, new orders in the textiles, clothing & footwear sub-sector picked-up strongly, lifting the new orders sub-index for this sub-sector to the neutral 50-point level in September, from contraction last month. ■ The contraction in new orders for the basic metals sub-sector moderated significantly in September.

65 60
Diffusion Index (Points)

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 each month. More information can be obtained from the Ai Group website www.aigroup.com.au.

55 50 45 40 35 30 25 20 15

75 70 65 60
Employment Diffusion Index (Points)

Employment

55 50 45 40 35 30 25 20
Sep 11 Dec 11 Mar 12 Jun 12 Sep 12

Decreasing

CoNtACt
Innes Willox Chief Executive Ai Group Tel 03 9867 0111

fINISHEd StoCKS ANd dElIvErIES
■ Manufacturing inventories continued to expand in September,

65 60
Diffusion Index (Points)
Increasing

■ ■

with a rise in this sub-index to 51.0 points in September compared with August (seasonally adjusted). Inventories increased most strongly in the paper, printing & publishing and construction materials sub-sectors. In contrast, supplier deliveries contracted for a seventh consecutive month in September, contracting at a quicker pace than in August. This sub-index fell by 3.2 points to 41.0 in September. Despite the fall in the deliveries sub-index for manufacturing as a whole, deliveries increased in three of the 11 sub-sectors, including textiles, clothing & footwear; paper, printing & publishing; and construction materials. Among the other sub-sectors, the food & beverages; basic metals; fabricated metals; and transport equipment sub-sectors recorded significant decreases in deliveries.

55 50 45 40 35 30
Mar 09 Mar 10 Mar 11 Mar 12 Dec 08 Jun 09 Sep 09 Dec 09 Jun 10 Sep 10 Dec 10 Jun 11 Sep 11 Dec 11 Jun 12 Sep 12

INtErNAtIoNAl PMI dAtA
Decreasing

Markit Economics www.markiteconomics.com

Deliveries

Finished Stocks

INPut CoStS ANd SEllINg PrICES
■ The increase in input costs continued in September, but eased in
Diffusion Index (Points)

90 80 70 60 50
Decreasing Increasing

intensity, with the seasonally adjusted sub-index falling 9.0 points to 57.1. Strong increases in input costs were recorded in most sub-sectors. ■ Selling prices continued to fall in September as the selling prices sub-index fell 4.6 points to 41.2.

CIPS Australia www.cipsa.com.au

40 30 20
Dec 08 Mar 09 Dec 09 Mar 10 Dec 10 Mar 11 Dec 11 Mar 12 Jun 09 Sep 09 Jun 10 Sep 10 Jun 11 Sep 11 Jun 12 Sep 12

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.
AIG12167

AuStrAlIAN PMI®
AuStrAlIAN PMI® ProduCtIoN EMPloyMENt NEW ordErS INvENtorIES SuPPlIEr dElIvErIES INPut PrICES ExPortS SEllINg PrICES AvErAgE WAgES

Sep 2012 44.1 45.5 40.7 44.3 51.0 41.0 57.1 48.3 41.2 62.5 73.0

Aug 2012 45.3 43.1 41.2 49.1 49.1 44.2 66.1 47.3 45.8 65.2 72.5

Monthly Change -1.2 2.4 -0.5 -4.8 1.9 -3.2 -9.0 1.0 -4.6 -2.7 0.5 pts

Direction Contracting Contracting Contracting Contracting Expanding Contracting Expanding Contracting Contracting Expanding Increase

Rate of Change Faster Slower Faster Faster From contracting Faster Slower Slower Faster Slower -

Trend** (Months) 7 6 6 7 1 6 124 7 18 41 ®

CAPACIty utIlISAtIoN (%)

Further Information Results are based on responses from over 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. Visit http://www.aigroup.com.au/economics for further economic analysis and information.