MNI 5 Things: Australia AI Mfg Expands But Drought A Headwind

By Sophia Rodrigues

     SYDNEY (MNI)  - Following are the five main observations we made from

Australian Industry Group's Performance of Manufacturing Index for August

published Monday:

     --The index rose in August, up 4.7 points to 56.7 and marked 23 straight

months of expansion. All seven activity sub-indexes were in expansion in August,

and five of the eight sub-sectors expanded in trend terms. 

     ----Drought conditions in Queensland and New South Wales are having an

adverse impact on input costs and sales for manufacturers. Among sectors, the

large machinery and equipment sub-sector declined 1.0 points to 55.4, with

respondents noting drought conditions hurting sales of machinery and equipment

to the agricultural sector. Food and beverage manufacturers were reporting

disrupted supply and higher prices of raw agricultural inputs. 

     --Indicators linked to inflation rose in August, pointing to signs of

building inflationary pressures. Input prices rose 9.3 points to 77.4, the

highest since March 2011. Average wages rose 4.1 points to 64.7 points, likely

reflecting the rise in minimum wages on July 1 is making their way through

industrial awards and agreements. Importantly, selling prices rose 5.1 points to

58.1, indicating customer price increases are becoming more widespread among

manufacturing businesses.

     --Exports sub-index rose 8.5 points to 58.4 and was the strongest in the

food and beverages sub-sector. The recent depreciation in the Australian dollar

may be a key factor helping exports.

     --Sales sub-index rebounded in August, up 15.2 points to 60.7, after

recording its lowest result in July since early 2016. The drought conditions may

be a temporary factor boosting sales, as meat production is lifted due to

destocking.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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