Update: Australia AI Mfg Index Down But Stays in Expansion

--Manufacturing Expands for 12 Straight Months

     SYDNEY (MNI) -  - From Australia Industry Group's Performance of

Manufacturing Index for September published Monday:

                          September  Change from August

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

Australian PMI                 54.2                -5.6

Production                     56.9                -4.5

New Orders                     55.9                -8.4

Employment                     52.4                -4.0

Inventories                    51.7                -7.2

Supplier Deliveries            50.5                -2.4

Exports                        51.2                +1.9

Sales                          51.4                +0.5

Average Wages                  61.2                +2.2

Input Prices                   65.8                +2.9

Selling Prices                 49.3                -4.4

Capacity Utilization (%)       77.6                +0.6

     FACTORS: The AI manufacturing index expanded for the 12th straight month in

September, but the pace slowed due to drops in five of the seven sub-indexes.

Still, all the seven sub-indexes were again in expansion in September, with new

orders leading at an elevated 55.9 points and production at 56.9. Among

sub-sectors, non-metallic mineral products rose 1.5 points to a record 75.5,

reflecting demand for building materials for local apartments and infrastructure

projects. Respondents also reported unexpected export orders to the U.S. as a

result of emergency relief and reconstruction operations in the wake of recent

hurricane damage. The largest sub-sector -- food, beverages and tobacco -- rose

marginally to 56.1 points as new orders and exports expanded, and production and

sales picked up. The large metal products index fell to 51.3 points -- the

lowest level this year -- but the sub-sector continues to benefit from stronger

demand from construction and engineering activity, as well as mining, utilities

and agricultural projects. Among price indicators, wage rose, which is a

positive. but input prices also rose while selling price fell, indicating

pressure on manufacturers' margins.

     TAKEAWAY: The manufacturing industry continues to expand despite an

elevated exchange rate, which is a positive development. The survey vindicates

the optimism shown by Reserve Bank of Australia in forecasting continued growth

for the economy despite the elevated Australian dollar, though it remains

concerned that a further rise could hurt growth and employment prospects.

     COMMENTS: AI Group Chief Executive Innes Willox said this year's recovery

in manufacturing activity is continuing, but the latest survey shows that

conditions are moderating and growth is decelerating.

     "Of great concern to all manufacturers continues to be the impact of energy

and gas prices on their bottom line. Mounting energy costs are further squeezing

already-fragile profitability," he said.

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

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