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The Australian December PMI is out, and it’s an ugly number. The index fell came in at 46.9 for the month, a fall of 3.2 points, indicating continued contraction in the nation’s manufacturing industry.

The key bright spots were Christmas demand leading to a 1.3 point bump in the food and beverages sub-index – the largest – to 60.4, the fastest pace of expansion since October 2013. And employment expanded slightly, with the sub-index rising 4.7 points to 52.5 points. This was mainly driven by jobs in the food and beverages sector.

But the PMI shows Australia’s economic transition towards services and away from heavier industry, with the overall reading dragged down by continued contraction in other areas such as metal products. It decreased for a third month to 40.9 points in December. The Australian Industry Group, which runs the survey, said the effects of the shuttering of Australia’s car manufacturing facilities were being felt.

Source: Ai Group

Metal products has now been in contraction for four years and the AiG says “there are few signs of improving conditions”. The related machinery and equipment sub-sector also fell, to 42.9, down 1.7 points.

“Respondents to the Australian PMI welcomed the further depreciation in the Australian dollar, but noted that the level of the dollar continues to encourage strong import competition. Business sentiment and appetite for investment remain weak,” Ai Group Innes Willox said. “The closure of Australian automotive assembly facilities now under way, plus the rapid decline in mining investment activity, are also weighing heavily on demand for locally made machinery inputs and components.”

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