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More upbeat news from Australia following the strong Coal, LNG and Iron Ore Export news. Australian AiG manufacturing PMI Index for March surged to a record high 63.1 from 57.5 in February. This was the 18th consecutive month of expansion.

Australia March PMI

Australian industry Group Performance of Manufacturing Index for March

March came in at a record high 63.1 from 57.5 in February (18th consecutive month in expansion)

  • Results above 50 points indicate expansion with higher results indicating a stronger expansion.
  • The previous record high for the Australian PMI® was 62.1 points in May 2002.
  • March 2018 marked an eighteenth month of expanding or stable conditions for the Australian PMI® and the longest run of continuous expansion since 2005.
  • All seven activity sub-indexes in the Australian PMI® expanded in March, with the new orders, employment and delivery sub-indexes all recording record highs.
  • Seven of the eight sub-sectors in the Australian PMI® expanded and one was stable in March (trend).
  • Three of the eight sub-sectors reached record highs including petroleum, coal, chemical and rubber products; metal products and machinery and equipment subsectors.
  • Weaker conditions remain evident in the small but diverse textile, clothing & other manufacturing sub-sector.
  • Capacity utilisation reached a record high of 81.2% of available capacity in March.
  • New orders have also very strong so far in 2018, suggesting that some manufacturers will need more investment and/or employment in order to meet future growth in demand.
  • Queensland manufacturing is performing particularly well in 2018, with 73.8 points in March and a record in January 2018 of 74.6 points (seasonally adjusted).
  • Manufacturers in Queensland are reporting increased demand for equipment, machinery and other inputs from a broad range of sectors including the construction, mining, agriculture and renewable sectors.

ACTIVITY SUB-INDEXES

▪ The production sub-index increased by 0.3 points to 62.2 points in March. Production is particularly strong at present in the petroleum, coal, chemicals and rubber products sub-sector and the machinery and equipment sub-sector.

▪ New orders jumped 11.2 points to a record high of 66.6 points in March and has been strongly positive (expanding) since late 2016. This augurs well for further recovery in 2018.

▪ The export sub-index rose by 2.4 points to 58.9 points in March. The exports sub-index has been accelerating in recent months, possibly due to a slightly weaker Australian dollar.

▪ The sales sub-index jumped 10.5 points to 63.9 points in March, indicating expanding growth in local sales. Metal products and machinery equipment manufacturers noted increased demand from east coast infrastructure projects and from the mining sector.

▪ The employment sub-index rose to a record high of 60.0 points in March, indicating a further recovery in employment numbers. After a sustained period of expansionary activity in 2017, more manufacturers are becoming confident enough to employ more staff. Concerns about skill shortages and/or wage pressures are emerging in some sub-sectors.

▪ The deliveries index reached a record high of 66.6 points in March, indicating a faster rate of supplies being ordered to meet forward production needs.

▪ Stocks (inventories) continued to be rebuilt in March, rising 1.3 points to 56.0 points.

▪ Capacity utilisation in March reached a record high of 81.2% of existing capacity. With new orders also tracking strongly, this suggests more manufacturers will need to increase their investment and/or employment in order to increase their capacity to meet future demand.

WAGES AND PRICES SUB-INDEXES

▪ The input prices sub-index was stable at 68.5 points in March and remains slightly above the 12-month average of 68.1 points. Many manufacturers’ profits are still under pressure from significantly elevated energy costs.

▪ The wages sub-index rebounded 6.6 points to 63.4 points in March, after recording its lowest level since July 2017 in February. Some manufacturers are reporting difficulty finding skilled tradespeople to carry out an increased work load. Wage pressures are emerging for skilled workers in some locations and specialisations after a sustained period of relatively flat wages (and declining manufacturing employment) from 2010 to 2016.

▪ The manufacturing selling price sub-index increased by 1.6 points to 52.2 points, indicating modest price increases for manufacturers’ customers in March. This suggests some but not all of the cost pressures from manufacturing inputs and especially energy inputs are being passed on to their customer base.

Source: PMI March 2018

From a Sunburnt Country

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