JAPA

NESE P

MI

Eu

ro

zo

NE P

MI

uSA

ISM

PM

IA

uSt

rA

lIA

N P

MI®

CH

INESE P

MI

DECEMBEr 2012®

MANufACturINg CoNtrACtS IN DECEMBEr KEy fINDINgS■ Manufacturing activity contracted for a 10th consecutive

month in December, with the seasonally adjusted Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) recording a level of 44.3, unchanged from (a slightly upwardly revised reading of 44.3) one month ago. (Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease).

■ The slump in manufacturing new orders also extended into the 10th month albeit at a slower rate, reflecting weak global demand and a softening Australian economy. The new orders sub-index rose 1.6 points to 45.7 in December.

■ The manufacturing production sub-index remained firmly in the red, at 42.5 in December, down by 2.3 points from November.

■ Although no sub-sectors expanded in December, the pace of contraction in the petroleum, coal, chemical & rubber products; metal products; and machinery & equipment sub-sectors eased.

■ Survey respondents remained cautious about the outlook. They cited a range of inhibitors including: soft demand; higher energy charges; stronger import competition; and the strong Australian dollar.

■ Wages and input costs continued to rise in December, while the persistent decline in selling prices eased only slightly, indicating that the profits for manufacturers remain under pressure.

SECtorS■ This month the Australian PMI® sub-sectors were updated

to align with the latest ANZSIC industry classifications. The sub-sectors were also re-weighted, to reflect the changing structural composition of Australia’s manufacturing industry (see footnote on page 2). This has resulted in a very slight upward revision to the level of the Australian PMI® this month (December) and last month (November).

■ Seasonally adjusted activity decreased in all eight of the revised manufacturing sub-sectors in December (that is, index levels were below 50 points).

■ The contraction of activity in the petroleum, coal, chemical & rubber products; metal products; and machinery & equipment sub-sectors eased while that in the food, beverage & tobacco products; wood & paper products; printing & recorded media; and non-metallic mineral products sub-sectors intensified.

ProDuCtIoN AND CAPACIty utIlISAtIoN■ Seasonally adjusted, the production sub-index decreased by 2.3

points to 42.5 in December, in a ninth consecutive month of decline in manufacturing output.

■ Production expanded in four out of the eight sub-sectors this month. Of these four sub-sectors, notable increases were reported in the food, beverage & tobacco sub-sector and in the textiles, clothing & other manufacturing sub-sector.

■ There were significant declines in production in the metal products sub-sector and the non-metallic mineral products sub-sector.

■ Capacity utilisation for all manufacturers increased slightly to 73.2% in December (not seasonally adjusted).

Cap

acit

y U

tilis

atio

n (

%)

Pro

du

ctio

n D

iffu

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n In

dex

(Po

ints

) Capacity Utilisation

20

25

30

35

40

45

50

55

60

65

70

60

65

70

75

80

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

Sep

12

Dec

12

Food, beverage & tobacco products

Textiles, clothing & other manufacturing

Wood & paper products

Printing & recorded media

Petroleum, coal, chemical & rubber products

Non-metallic mineral products

Metal products

Machinery & equipment

Australian PMI

0 10 20 30 40 50 60 70 80 90 100

IncreasingDecreasing

Diffusion Index Nov 12 Dec 12

20

25

30

35

40

45

50

55

60

3 month moving averageAustralian PMI® In

crea

sin

gD

ecre

asin

g

Dif

fusi

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Ind

ex (

Poin

ts)

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

Sep

12

Dec

12

AUST

USA

EURO

JAPAN

CHINA

44.3

DEC

NOV30

35

40

45

50

55

60

65

49.5

NOV

OCT

NOV

OCT

NOV

OCT

NOV

OCT

30

35

40

45

50

55

60

65

46.2

30

35

40

45

50

55

60

65

46.5

30

35

40

45

50

55

60

65

50.5

30

35

40

45

50

55

60

65

AuStrAlIAN PMI®

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.

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.

CoNtACt

Innes WilloxChief ExecutiveAi GroupTel 03 9867 0111

INtErNAtIoNAl PMI DAtA

Markit Economicswww.markiteconomics.com

CIPS Australiawww.cipsa.com.au

© 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.

AIG12483

Nov 2012 (revised) Dec 2012 Monthly Change Direction Rate of Change Trend** (Months)

AuStrAlIAN PMI® 44.3 44.3 0.0 Neutral - -

ProDuCtIoN 44.8 42.5 -2.3 Contracting Faster 9

EMPloyMENt 43.2 44.5 1.3 Contracting Slower 9

NEW orDErS 44.1 45.7 1.6 Contracting Slower 10

INvENtorIES 43.7 39.5 -4.2 Contracting Faster 3

SuPPlIEr DElIvErIES 45.7 47.2 1.5 Contracting Slower 9

INPut PrICES 62.7 60.6 -2.1 Expanding Slower 127

ExPortS 37.6 33.2 -4.4 Contracting Faster 10

SEllINg PrICES 40.6 43.0 2.4 Contracting Slower 21

AvErAgE WAgES 60.2 56.6 -3.6 Expanding Slower 44

CAPACIty utIlISAtIoN (%) 72.4 73.2 0.8pts Increase - -

NEW orDErS AND ExPortS■ In seasonally adjusted terms, the new orders sub-index increased

by 1.6 points to 45.7 points in December, bringing the decline in new orders into a 10th consecutive month.

■ Unadjusted, new orders expanded in four of the eight sub-sectors in December. Sub-sectors with expanding new orders included: food, beverage & tobacco products; textiles, clothing & other manufacturing; wood & paper products; and petroleum, coal, chemical & rubber products.

■ Reflecting weakness in the global economy, manufacturing exports recorded another month of significant decline. The exports sub-index dropped 4.4 points to 33.2 in December, marking the 10th consecutive month of contraction and one of the lowest readings for the exports sub-index in this series.

EMPloyMENt AND AvErAgE WAgES■ The seasonally adjusted employment sub-index increased 1.3

points to 44.5 in December, indicating that manufacturing employment has contracted for the ninth consecutive month albeit at a slower rate in December.

■ Employment expanded in the wood & paper products and non-metallic mineral products sub-sectors.

■ Employment declined strongly in the food, beverage & tobacco products sub-sector.

■ Although conditions facing manufacturing remain difficult and employment has been falling, relatively strong wages growth continued to be reported by manufacturing businesses in December.

fINISHED StoCKS AND DElIvErIES■ Manufacturing inventories contracted again in December, with a

fall in this sub-index to 39.5 points in December compared with (a revised) 43.7 points in November (seasonally adjusted).

■ Inventories decreased most strongly in the food, beverage & tobacco sub-sector and the wood & paper products sub-sector. Stocks increased markedly in the printing & recorded media sub-sector.

■ Supplier deliveries contracted for a 10th consecutive month in December. The rate of decline was, however, slower as the sub-index increased by 1.5 points to 47.2 in December.

■ Despite the fall in the deliveries sub-index for manufacturing as a whole, deliveries increased in five of the eight sub-sectors, including food, beverage & tobacco products; printing & recorded media; and non-metallic mineral products.

■ Among the other sub-sectors, the metal products sub-sector recorded significant decreases in deliveries.

INPut CoStS AND SEllINg PrICES■ The increase in input costs slowed slightly in December, with

the seasonally adjusted sub-index falling 2.1 points to 60.6. Continuing increases in input costs were recorded in most sub-sectors.

■ Selling prices continued to fall in December albeit at a slower rate compared to a month ago. The selling prices sub-index increased 2.4 points to 43.0. 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.

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Deliveries Finished Stocks

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