Food and beverage bucks the trend

The food, beverage and tobacco sub-sector has had its ninth month of expansion, while the manufacturing industry overall contracts.

Photo : William Tracey Group

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) fell by 3.6 points to 45.4 points in February (seasonally adjusted). This indicated a third month of contraction in conditions (readings below 50 points indicate contraction) across the manufacturing sector following a brief stabilisation in November 2014.

The food, beverages and tobacco sub-sector’s Performance of Manufacturing Index decreased by 2.8 points to 60.1 points in February (three-month moving averages), indicating a ninth month of expansion for this sub-sector, after a brief contraction in May 2014.

The food, beverages and tobacco sub-sector, the single largest manufacturing sub-sector, has recorded the strongest growth among all the manufacturing sub-sectors over the past two years.

Local demand looks solid and export volumes are benefiting from a lower dollar, but respondents expressed concerns this month about a decline in global rural commodity prices and their potential effects in local markets.

Overall manufacturing exports expanded for a third consecutive month in February, following further falls in the dollar. Much of this growth was concentrated in the food and beverages sub-sector.

Among the other activity indicators however, manufacturing production contracted (i.e. below 50 points) for the fourth consecutive month while new orders declined for a third month.

Manufacturing sales contracted for a ninth month in February. Supplier deliveries and stock levels also returned to contraction this month following a brief expansion in January, while manufacturing employment contracted for a second month.

Three of the eight manufacturing sub-sectors in the Australian PMI® expanded (i.e. above 50 points) in February. Along with the food and beverages sub-sector, the relatively small textiles, clothing and furniture sub-sector, and non-metallic mineral products (mainly building materials) also both expanded, for a fourth consecutive month.

The lower Australian dollar and its further depreciation since September 2014 have boosted manufacturing export volumes over recent months. However, the lower dollar has also increased prices for imported inputs, which has put further downward pressure on manufacturers’ margins.

Source : Food News    Jasmine O'Donaghue  March 2nd 2015