Manufacturing PMI

The Judo Bank Australia Manufacturing PMI, a Purchasing Managers' Index for factories, is compiled by S&P Global and published with Judo Bank. Running since May 2016, each month it surveys purchasing managers, staff who buy inputs for producers. The panel holds around 400 manufacturers stratified by sector and workforce size based on GDP contributions. It blends 5 diffusion indices, which gauge the direction of change, into 1 headline where above 50 means improvement and below 50 means deterioration.

It belongs to surveys covering over 40 countries, described as the most closely watched business surveys by central banks, financial markets and decision makers. It does not track United States factories, direct output volumes or gross domestic product (GDP). The Composite and Services gauges are not comparable with it.

Responses are collected in the 2nd half of each month and show direction of change from the previous month. A flash, an early estimate from 80-90% of responses, appears around the 3rd week at 09:00 Sydney time with Composite and Services indices.

The final, seasonally adjusted to remove normal seasonal swings, follows on the 1st working day after the month at 09:00 Sydney time. It includes headline PMI, Output Index, charts, component detail and comment. Underlying data are never revised but seasonal factors may be revised. The average gap between flash and final stands at 0.1 points (0.4 in absolute terms).

The headline moves with 5 weighted parts; export orders, backlogs, input and output prices and confidence are tracked but excluded.

• New Orders, 30%: captures demand inflow for manufactured goods.
• Output, 25%: captures production volumes; also published standalone as the Manufacturing Output Index.
• Employment, 20%: captures manufacturing staffing levels.
• Suppliers' Delivery Times, 15%: captures supply delays, inverted to move with the other indices.
• Stocks of Purchases, 10%: captures input inventory holdings.

The December 2023 final was collected 05-18 December 2023 and released January 2, 2024. It showed a headline 47.6 after 47.7, a 10th straight deterioration at the fastest pace since May 2020.

Output fell to 45.5, a low last seen in May 2020, while new orders fell for a 13th month on weak domestic and foreign demand. Employment held near neutral at 48.4, its lowest since mid-2020, as firms kept staff while cutting production and working through backlogs.

Stocks of finished goods rose on weak sales and shipping delays. Business confidence improved to a three-month high but stayed below average. The gap shows employment and inverted delivery times cushioning the headline, while faster price gains stayed consistent with 2-3% inflation.

1. Diffusion index, a gauge of change direction: For each variable, add the % reporting higher to half the % reporting unchanged; scores run 0-100.

For example, 30 higher, 50 unchanged and 20 lower among 100 makers gives 55.0.

1. Seasonal adjustment, removal of normal seasonal swings: Adjust each index to remove normal seasonal swings.
2. Inversion, flipping direction for comparability: Invert the Suppliers' Delivery Times index by subtracting it from 100, so slower deliveries move with the other indices.
3. Headline average: Multiply each index by its weight, add the results, then divide by 100.

For example, 55.0, 52.0, 49.0, 55.0 inverted and 48.0 give 52.4, a modest improvement.

1. Composite blend: Average comparable Manufacturing Output and Services Activity by GDP shares (value added); it is not comparable with the headline Manufacturing PMI.