Australia has now witnessed nine consecutive months of expansion, its longest run since 2006 and today's release shows the rate is increasing significantly. One of the key drivers for the turnaround of manufacturing is the fall of the Australian Dollar, which has fallen 20c in less than 18 months.
All seven sub-indices are now expanding and at a greater rate since Feb. New Orders, production and sales take the lead, expanding at 61.7, 60 and 59.5 respectively. Even the employment index which was contracting in Feb is now expanding which will provide RBA further comfort with the highly debated ABS employment data.
The 4 charts above compares manufacturing, construction and services March PMI release with a composite (which is simply an average of the thee). The snapshot excludes today's magnificent manufacturing read, but it is good enough to show how the composite appears and which sectors are under or 'over the line'.
The composite is a familiar global story as it meanders above and below the 50 line and with each swing being of lower magnitude. On the plus side the composite has spent a considerable amount of time below in contraction mode so the optimist could assume we have bottomed, so we may begin to see a pickup across all three sectors over the coming months. However the pessimist may point towards the services and construction sector to bring the optimist back in line. The construction index continues to contract and when you consider the worrying signs from December's Capex data then it is hard to see how the composite will begin to track higher like manufacturing has. Construction is of particular interest as it accounts for the higher proportion of GDP (second only to mining).
AUDUSD closes March with its most bullish monthly close since Oct 2011. Whilst I make no claim to expecting the timing of this rally, it does not come as a huge surprise as I have been monitoring the lack of bearish thrust, falls breakdowns and bullish divergences forming for several months. With March's candle being elongated (volatile) yet with only small wicks; it does point to further upside whilst it takes full advantage of Greenback weakness. However we should take note of the cluster of resistance levels nearby, such as the 38.2% Fibonacci, 200 week MA and prior swing highs.
If we do manage to trade up to the 80 handle we face a similar hurdle of resistance levels with the 50% (usually most reliable) and 2010 lows. And before we get ahead of ourselves with bull goggles let's not forget we still remain in a bearish channel and printing lower lows and highs; So we remain in a bearish trend on the monthly and will continue to monitor the USD Index for any signs of a bottom to suggest a swing high on AUDUSD over the coming months.
Australian Manufacturing PMI soars to 16yr high
The rate of expansion in today's manufacturing read gave further comfort to the bulls as it far exceeded even their expectations. However we still await services and construction which have failed to take manufacturing's lead in recent months.