October 23, 2012
Manufacturing Activity Index – Q3 2012
The Manufacturing Activity Index was unchanged in Q3 – despite diverging trends in the index components – remaining at negative levels. The index indicates further falls in Manufacturing growth in the quarter, which remains burdened by global economic trends and the strength of the dollar
The Manufacturing Activity Index* was unchanged in Q3 – despite diverging trends in the index components – remaining at negative levels. The index indicates further falls in Manufacturing growth in the quarter, which remains burdened by global economic trends and the strength of the dollar.
- NAB’s Manufacturing Activity Index was stable in September quarter, at -0.7 points. This level implies further declines in manufacturing activity for the quarter – at around -0.9% qoq.
- The stable Activity Index masks the diverging trends in the index components in Q3. A steep decline in Business Confidence and weaker growth in product prices were offset by an easing in the growth rate for purchase costs.
- Business Confidence declined further in Q3 2012 – down to -12 points (from -5 points). This sharp decline was in contrast to a more stable trend in confidence for the broader economy. The largest falls in confidence were recorded in the Printing and Chemicals sectors, while there was a significant improvement in the Metals category.
- Product prices (a lagged measure in our index) declined slightly in Q1 2012, with growth of -0.2% quarter-on-quarter. The largest declines in the product price growth were recorded in the Food products and Wood products sectors, while Chemicals recorded an improvement.
- Purchase costs softened in the first quarter for the manufacturing sector, offsetting some of the negative trends from confidence and product prices. Growth in purchase costs eased from +0.5% to +0.2%. The largest falls in the growth rate were recorded in Chemicals, Machinery & Equipment, Printing and Metal products.
- Labour cost trends were marginally positive for the Index in the March quarter, with growth easing to +0.5% (from +0.6% previously). This component had minimal influence on the Activity Index in September.
- The minimal movement in the aggregate index masks some divergent trends by sub-sector. In the September quarter, there were improving trends for the Chemicals and Metal products sectors, while producers in the Food products and Wood products sector saw deterioration.
*NAB’s Manufacturing Activity Index (MAI) has been constructed to replicate quarterly movements in activity in the manufacturing sector. It comprises weighted components of business confidence and profits (in turn based on weighted movements in output and input prices, which are lagged by two quarters). The MAI signals further decline in quarterly manufacturing activity in Q3 2012 – with the index equivalent to a decline of around -0.9%.
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