MNI ANALYSIS: Australia AI Mfg Expansion Slows Significantly

--But Still in Expansion for 13th Straight Month

--Latest Result Affected by Closure of Car Assembly Lines

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

for the thirteenth straight month but the pace has slowed significantly in the

last two months, with just three of the seven sub-indexes remained in expansion

in October.

     Data published by the AI Group showed its manufacturing sentiment index

stood at 51.1 in October, down 3.1 points from September and down sharply from

59.8 in August, which was the highest result since 2002.

     October marked the end of automotive production in Australia, with the

closure of the last car assembly lines at General Motors in Adelaide and Toyota

in Melbourne. This was reflected in the lower overall results and produced an

absolute contraction in the index in South Australia.

     New orders and sales expanded at a slower rate in October, while employment

expanded at a slightly stronger pace. But exports fell into contraction,

inventories and production fell sharply while supplier deliveries was mostly

stable.

     Among sub-sectors, food and beverage rose to the highest result since May.

But the sector is facing high input costs, with many respondents reporting steep

price rises for dairy product inputs, especially butter, in addition to the

energy and gas price rises.

     Expansions in the large petroleum, coal, and rubber products sector and in

the machinery equipment sector slowed further in October.

     Among price indexes, input prices rose slightly further, the wages

sub-index eased and selling prices remained in contraction. Gains in selling

prices have remained relatively subdued in 2017, so the latest input price rises

for energy, dairy and other inputs will be squeezing manufacturers' margins

again, AI Group said.

     AI Group Chief Executive Innes Willox said that outside of the automotive

sub-sector, conditions appeared to be relatively buoyant, if a touch slower, for

manufacturers in October. 

     "Positive sources of demand for Australian building materials, machinery

and equipment include apartment and infrastructure construction; defence, mining

and agricultural equipment; renewables and utilities projects. Manufacturers

from all sectors continue to report that higher input costs for electricity and

gas and also for selected raw inputs such as milk and butter are biting into

margin."

     From Australia Industry Group's Performance of Manufacturing Index for

October published Wednesday:

                          October  Change from September

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

Australian PMI               51.1                   -3.1

Production                   48.4                   -8.5

New Orders                   55.1                   -0.8

Employment                   53.2                   +0.8

Inventories                  42.6                   -9.1

Supplier Deliveries          50.2                   -0.3

Exports                      48.7                   -2.5

Sales                        51.0                   -0.4

Average Wages                59.0                   -2.2

Input Prices                 66.2                   +0.4

Selling Prices               48.6                   -0.7

Capacity Utilization (%)     74.7                   -2.9

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

[TOPICS: MTABLE,MALDS$,M$A$$$,M$L$$$,MT$$$$]