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Manufacturing 'surges into expansion' in October: Ai Group

Australian manufacturing output expanded in October and with restrictions in Victoria being lifted there are very good prospects of further strength in the closing months of 2020, according to employers' association the Australian Industry Group (Ai). The food and beverages sector led the way with strong contributions from machinery and equipment manufacturers and growth in textiles, clothing, footwear, paper & printing.

 

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The Ai Australian Performance of Manufacturing Index (Australian PMI) increased by 9.6 points to 56.3 in October, indicating expanding conditions for the first time since July.

"With the quantity of fiscal support easing in October and with the tax cuts only just starting to flow through, the lift in sales and the strong growth of new orders are particularly encouraging signs of improving household and business confidence,” said Ai Group CEO Innes Willox. “The solid national performance was achieved despite another month of contraction in Victoria. With restrictions in Victoria being lifted there are very good prospects of further strength in the closing months of 2020.”

ai logo bnAustralia's manufacturing industries grew solidly in October with production, employment, sales and exports all moving into growth territory. “Once again, the large food & beverages sector led the way with strong contributions from machinery & equipment manufacturers and with support from firmer growth in the textiles, clothing, footwear, paper & printing group,” Ai said. “The chemicals sector stabilised in October while the pace of contraction eased in both the metal products and building materials sectors.

“Respondents across all sectors noted a jump in sales and new orders as a result of pent up demand from the initial activity restrictions. The jump into expansion was driven by large improvements in New South Wales, which rose into expansion, and Victoria, which remained in contraction but improved from a deep contraction in September.”

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All seven activity indices in the Australian PMI were in expansion in October, with supplier deliveries (up 16.0 points to 58.8) and new orders (up 13.3 points to 58.4) experiencing large increases – possibly because some manufacturers anticipate higher production in the coming months as activity restrictions are eased. Sales also climbed significantly (up 14.9 points to 56.4) in October, while the employment index returned to positive territory (up 7.6 points to 55.3).

Among the six manufacturing sectors, the large food & beverages (up 2.0 points to 61.6) and machinery & equipment (up 0.4 points to 53.9) manufacturing sectors expanded, as did the smaller, diverse TCF, paper & printing sector (up 2.1 points to 53.7). Contraction was evident in the metal products (up 0.6 points to 47.4) and building materials (up 2.6 points to 46.1) sectors, while the chemicals sector was broadly stable (up 2.3 points to 50.9).

The Australian PMI is a national composite index calculated from a mix of the indices for production, new orders, deliveries, inventories and employment.