FEBRUARY 2013

AUSTRALIAN PMI
FEB

MANUFACTURING CONTRACTION EASES IN FEBRUARY

KEY FINDINGS
Although manufacturing activity contracted for a 12th

65 60 55

AUST

45.6

50 45 40 35

Decreasing

EUROZONE PMI

consecutive month in February, the pace of decline eased markedly from a month ago. The seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) rose 5.4 points to 45.6. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease.) Manufacturing is showing tentative signs of a pick-up following improvements in new orders, production and employment sub-indices during February, even though all remained below 50 points. The decline in manufacturing production slowed significantly in February as the production sub-index rose to 46.6 from 40.4 a month ago. The employment sub-index rose 7.4 points to 47.5, its highest reading since June 2012 (albeit still contractionary). The pace of contraction in manufacturing new orders also slowed, with the new orders sub-index rising 2.4 points to 41.8. The food, beverage & tobacco products and wood & paper products sub-sectors expanded in February, while the printing & recorded media sub-sector recorded the steepest contraction. Survey respondents cited a range of inhibitors, including: soft demand; weak confidence; and the strong Australian dollar. Exporters ongoing problems with the high dollar is evident in the exports sub-index this month, which remained close to last months all-time low, at just 31.2 points. Wages and input costs continued to rise strongly in February, while the decline in selling prices persisted, indicating that profits for manufacturers remain under pressure.

JAN

30

60 55 50
Diffusion Index (Points)
Increasing

JAN

65 60

45 40 35 30 25 20
May 09 Feb 10 May 10 Feb 11 May 11 Feb 12 May 12 Aug 09 Nov 09 Aug 10 Nov 10 Aug 11 Nov 11 Aug 12 Nov 12 Feb 13

USA ISM PMI

53.1

55 50 45 40 35

USA

DEC

30

Australian PMI

3 month moving average

JAN

65 60 55

EURO

47.9

50 45 40 35

SECTORS
Seasonally adjusted, the food, beverage & tobacco products and

Decreasing

Increasing

DEC

Petroleum, coal, chemical & rubber products Non-metallic mineral products Metal products Machinery & equipment Australian PMI

JAPANESE PMI

wood & paper products sub-sectors expanded in February. The other six sub-sectors recorded contractions. The pace of decline was significant in the printing & recorded media; non-metallic mineral products; and machinery & equipment sub-sectors, with the decline in the printing & recorded media sub-sector being the sharpest.

Food, beverage & tobacco products Textiles, clothing & other manufacturing Wood & paper products Printing & recorded media

30

JAN

65 60 55

JAPAN
0 10 20 30 40 50 60 70
Feb 13

47.7

50 45 40 35

80

90

100

Diffusion Index

Jan 13

DEC

30

PRODUCTION AND CAPACITY UTILISATION

Production Diffusion Index (Points)

70 65 60 55 50 45 40 35 30 25 20
May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13

80

Seasonally adjusted, the production sub-index increased by

JAN
Production Capacity Utilisation

65 60

6.2 points to 46.6 in February. Although this marks the 11th consecutive month of decline in manufacturing output, the improvement in February is welcome. Production expanded in the wood & paper products and petroleum, coal, chemical & rubber products sub-sectors (the former for a second consecutive month). The other six sub-sectors still showed a contraction in production, but improvements were recorded in three of these sub-sectors, namely: non-metallic mineral products; metal products; and machinery & equipment. Capacity utilisation for all manufacturers increased to 72.8% in February (not seasonally adjusted).

Capacity Utilisation (%)

75

CHINESE PMI

52.3

55 50 45 40 35

70

CHINA

65

60

DEC

30

NEW ORDERS AND EXPORTS

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

65 60 55
Diffusion Index (Points)
Increasing

by 2.4 points to 41.8 points in February after hitting a 43 month low of 39.4 points in January. In unadjusted data terms, the wood & paper products and petroleum, coal, chemical & rubber products sub-sectors recorded increases in new orders in February. Reflecting ongoing weakness in the global economy and the high Australian dollar, the manufacturing exports sub-index remained at a critically low level in February. The exports sub-index rose just 0.1 points to 31.2 in February, marking the 12th consecutive month of contraction and the second lowest reading for the exports sub-index in this series (the lowest point being last month in January).

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

Exports

New Orders

The seasonally adjusted employment sub-index increased by 7.4

Aug 09

Aug 10

Aug 11

May 09

May 10

May 11

May 12

Aug 12

Nov 09

Feb 10

Nov 10

Feb 11

Nov 11

Feb 12

Nov 12

Feb 13

points to 47.5 in February, possibly indicating that the decline in manufacturing employment has slowed. This was the best level for the employment sub-index since March 2012. Employment expanded this month (with index readings above 50) in the wood & paper products; food, beverage & tobacco products and petroleum, coal, chemical & rubber products sub-sectors. Although conditions facing manufacturing remain challenging and manufacturing employment has been falling in aggregate, moderate wages growth continued to be reported by manufacturing businesses in February.

65
Diffusion Index (Points)

60 55 50 45 40 35 30 25 20
Employment

Decreasing

Increasing

EMPLOYMENT AND AVERAGE WAGES

75 70

Average Wages

Feb 13

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

FINISHED STOCKS AND DELIVERIES

Manufacturing inventories contracted again in February,

65 60
Diffusion Index (Points)

but at a significantly slower rate compared to a month ago. The sub-index jumped 10.8 points higher to 46.0 in February (seasonally adjusted). Inventories increased considerably (with index readings above 50 points) in the wood & paper products and non-metallic mineral products sub-sectors, but decreased significantly in the metal products and machinery & equipment sub-sectors. The fall in supplier deliveries persisted for a 12th consecutive month in February, albeit at a slowing pace. The sub-index increased by 3.7 points to 49.0 in February, only just below the crucial 50 point marker separating contraction from expansion. Among the sub-sectors, only the food, beverage & tobacco products; wood & paper products; and textiles, clothing and other manufacturing sub-sectors recorded increases in supplier deliveries (readings in this sub-index above 50 points).

55 50 45 40 35 30
May 09 Feb 10 May 10 Feb 11 May 11 Feb 12 May 12 Aug 09 Nov 09 Aug 10 Nov 10 Aug 11 Nov 11 Aug 12 Nov 12

INTERNATIONAL PMI DATA

Decreasing

Markit Economics www.markiteconomics.com

Feb 13

Deliveries

Finished Stocks

INPUT COSTS AND SELLING PRICES

The increase in input costs gained pace again in February,

90 80
Diffusion Index (Points)

with the seasonally adjusted sub-index rising 1.7 points to 60.2. Continuing increases in input costs were recorded in all sub-sectors. Selling prices continued to fall, but at a slower rate, in February. The selling prices sub-index increased 4.3 points to 44.3. 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 and against ongoing strength of the Australian dollar.

70 60 50

Decreasing

40 30 20
May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug11 Nov 11 Feb 12 May 12 Aug 12 Nov 12

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.
AIG12696

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

Feb 13 45.6 46.6 47.5 41.8 46.0 49.0 60.2 31.2 44.3 59.0 72.8

Monthly Change 5.4 6.2 7.4 2.4 10.8 3.7 1.7 0.1 4.3 -1.0 1.5 pts

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

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

Trend** (Months) 12 11 11 12 5 12 129 12 23 46

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.

Feb 13