Australia’s Manufacturing Sector to Continue its Growth Momentum

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According to the Australian Performance of Manufacturing Index (PMI), the manufacturing industry has grown consistently throughout 2017. Shane Oliver, AMP Capital chief economist, predicts that the industry’s growth momentum will carry in 2018, as long as the current economic conditions prevail.

Consistent Growth

A score of above the 50-point mark in the PMI monthly readings indicates expansion. Despite a slight drop in December 2017, when the PMI registered 56.2 from 57.3 month-on-month, the sector has been on a growth spurt since October 2016. So expect demand for hydraulic press and blanking tools to be more noticeable in 2018, to keep pace with the country’s manufacturing sector.

Record low-interest rates and a competitive Australian currency has supported this growth trend for 15 consecutive months. Oliver expects the manufacturing industry to expand ‘through most if not all of 2018,’ as there is a small chance of higher interest rates or a sharp increase in the Australian dollar.

Other Supporting Factors

Manufacturing companies will be keeping an eye on the National Energy Guarantee in 2018 ‒ which aims to help secure reliable energy sources and reduce emissions ‒ as well as other measures that may lower business costs, according to Australian Industry Group CEO Innes Willox. However, the industry also needs to address a growing shortage of skilled professionals to ensure a continued growth momentum.

The Australian PMI’s seven sub-indices expanded in December, led by production, stocks (inventories) and supplier deliveries. These segments’ expansion occurred despite high energy prices and the shutdown of Holden and Toyota’s car production in the country. Although these high scores are encouraging, other sectors are doing equally well or better: the food and beverages segment posted a reading of 63.2 points, which was the highest monthly result since April 2016.

Conclusion

Although 2018 looks like another prosperous year for manufacturing companies, they cannot afford to be complacent. To enjoy the momentum built up in 2017, they need to invest time and money into new equipment and skilled workers.