MNI ANALYSIS: Australia AI Mfg Expands for 14th Straight Month

     SYDNEY (MNI) - Australia's manufacturing industry expanded in November for

the fourteenth straight month as new orders rose and inventories increased

further.

     Data published by the AI Group Friday show all seven manufacturing

sub-indexes expanded in November compared with just three in October. However,

the performance of sub-sectors was mixed, with food and beverages outperforming

but others either slowing or in contraction.

     In particular, the non-metallic mineral sub-sector, which is mainly

building materials, fell into contraction at 41.7 after expanding strongly

through much of this year. The decline reflected slowing demand from residential

construction but is still surprising given government and other construction

projects are expected to fill in most of that void.

     The large metal products sub-sector fell to 48.6 and was in contraction for

a second month after a strong recovery earlier this year. This sector is

benefitting from engineering activity but is facing headwinds from higher energy

costs and shortages of skilled metal tradespeople.

     In contrast, the food and beverages sub-sector rose to the highest level

since April 2016 as production, new orders and exports rose strongly.

     The input prices sub-index spiked significantly higher, up 10.2 points to

76.4, the highest level since March 2011. The latest jump is mainly due to rises

in energy input costs and also likely due to a rise in imported input prices.

The rise in input prices is hurting margins as manufacturers are not able to

fully pass them on to selling prices.

     Overall, even as the overall manufacturing industry shows strong expansion

there are headwinds from rising input prices due mainly to higher energy costs.

The wages sub-index also rose though skill shortages did not appear to be

widespread. Selling prices rose slightly, indicating some ability to pass on

rising costs, but margins remained under pressure.

     From Australia Industry Group's Performance of Manufacturing Index for

November published Friday:

                          November  Change from October

-------------------------------------------------------

Australian PMI                57.3                 +6.2

Production                    56.6                 +8.2

New Orders                    60.4                 +5.3

Employment                    54.9                 +1.7

Inventories                   54.4                +11.8

Supplier Deliveries           57.3                 +7.1

Exports                       57.6                 +8.9

Sales                         56.2                 +5.2

Average Wages                 64.1                 +5.1

Input Prices                  76.4                +10.2

Selling Prices                52.6                 +4.0

Capacity Utilization (%)      74.9                 +0.2

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

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