Australia's manufacturing sector enjoyed a strong 2017

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Australia’s manufacturing sector finished 2017 on a strong note with activity levels continuing to improve at a decent clip in December.

The Ai Group’s Performance of Manufacturing Index (PMI) came in at 56.2 points for December in seasonally adjusted terms, down marginally from the 57.3 level of November.

This reading measures perceived changes in activity levels across Australia’s manufacturing sector from one month to the next. Anything above 50 signals that activity levels are improving while a reading below suggests they’re deteriorating. The distance away from 50 indicates how quickly activity levels are expanding or contracting.

So at 56.2, December’s reading indicates that activity levels continued to improve last month, albeit at a slightly slower pace than November.

Activity levels have either held steady or improved for 15 consecutive months, the longest continuous expansion since 2005.

Source: Ai Group

“Participants noted stronger production to fill long standing orders, after improved business conditions throughout 2017,” the Ai Group said.

Adding to the positive headline result, the group said that all seven activity subindices improved in December.

“Production, stocks (inventories) and supplier deliveries expanded at an accelerated pace while new orders, employment, exports and sales were slower, albeit still expanding in December,” it said.

“Some participants noted reduced export orders and/or sales in December, possibly in response to the fluctuating Australian dollar and slower building activity.”

This table from the Ai Group shows how each component fared in December in trend terms. Like the headline PMI, a reading above 50 indicates that it improved from one month earlier.

Source: Ai Group

Mirroring the broad-based improvement recorded in December, all sectors bar two saw activity levels increase from November.

“The very large food and beverages sub-sector strengthened further with its index rising to its highest level since April 2016,” the Ai Group said.

“The wood and paper sub-sector moved into contraction and the ‘textiles, clothing, furniture and other’ sub-sector stayed in contraction in December.”

Following the release of the PMI today, markets will receive separate reports on services and construction in the days ahead, far larger components within the Australian economy.

Like Australia’s manufacturing sector, activity levels across these sectors improved noticeably over the course of 2017.

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