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1 Oct 2013
Australian PMI back into expansion territory
FXstreet.com (Barcelona) - One positive surprise for the Australian economy, ahead of the RBA rate decision, was the Australian AiG Performance of Manufacturing Index read, which unexpectedly came at 51.7 vs - expansion territory - 46.4 last.
Key findings AiG
"This month’s move into expansion was driven by strong rises in the sub-indexes for new orders and supplier deliveries, both of which moved well above 50 points. Inventories were broadly stable at just over 50 points. Production and employment improved this month, but remained just below the 50-point level that separates expansion from contraction."
"Across the sub-sectors, expansion is strongest in the food, beverages and tobacco subsector, with mild expansion also evident in some of the smaller sub-sectors. The metal products and machinery and equipment sub-sectors continue to show severe contraction."
"Comments from survey participants indicate that the benefits of: (1) a lower Australian dollar; (2) lower interest rates; and (3) the recent Federal election are showing through in improved sentiment and actual orders from Australian-based customers. Businesses said this improvement is so far weak but still noticeable. They also noted however, that new orders are still declining from mining industry customers and from the public sector."
"The lower Australian dollar is still mainly benefiting local orders (i.e. import replacement) rather than outright growth in exports. Businesses noted that export markets remain tough."
View from the street
Greg McKenna, CEO at GlobalFX, wrote for Business Insider Australia the following view on the upbeat indicator: "Clearly the economy still needs to transition from mining but this release is very welcome news on that front."
McKenna adds: "Some might argue that the transition is not assured though as the strength in the sub-sectors is strongest in food, beverages and tobacco but metal products and machinery and equipment sub-sectors show “severe contraction”. On the other hand however where else are Australian households going to start to free up their wallets other than the subsectors that are benefiting, and the fall in the Aussie dollar will give us a J-curve effect in time but it’s not instantaneous."
Key findings AiG
"This month’s move into expansion was driven by strong rises in the sub-indexes for new orders and supplier deliveries, both of which moved well above 50 points. Inventories were broadly stable at just over 50 points. Production and employment improved this month, but remained just below the 50-point level that separates expansion from contraction."
"Across the sub-sectors, expansion is strongest in the food, beverages and tobacco subsector, with mild expansion also evident in some of the smaller sub-sectors. The metal products and machinery and equipment sub-sectors continue to show severe contraction."
"Comments from survey participants indicate that the benefits of: (1) a lower Australian dollar; (2) lower interest rates; and (3) the recent Federal election are showing through in improved sentiment and actual orders from Australian-based customers. Businesses said this improvement is so far weak but still noticeable. They also noted however, that new orders are still declining from mining industry customers and from the public sector."
"The lower Australian dollar is still mainly benefiting local orders (i.e. import replacement) rather than outright growth in exports. Businesses noted that export markets remain tough."
View from the street
Greg McKenna, CEO at GlobalFX, wrote for Business Insider Australia the following view on the upbeat indicator: "Clearly the economy still needs to transition from mining but this release is very welcome news on that front."
McKenna adds: "Some might argue that the transition is not assured though as the strength in the sub-sectors is strongest in food, beverages and tobacco but metal products and machinery and equipment sub-sectors show “severe contraction”. On the other hand however where else are Australian households going to start to free up their wallets other than the subsectors that are benefiting, and the fall in the Aussie dollar will give us a J-curve effect in time but it’s not instantaneous."