Australian PMI®: Activity falls again but pace of decline eases

The manufacturing industry continued to deteriorate in March although the rate of decline has eased with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) up slightly by 1.7 points to 33.4. This is well below the 50-point mark that separates expansion from contraction.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said: "The manufacturing industry continues to endure extremely challenging economic conditions with the March Australian PMI® showing that all sectors in all states, with the exception of Tasmania, declined in March.

"Production, capacity utilisation and exports remain in the doldrums, with the new orders reading – although a little up from February - not indicating any early pick up. As a result, employment fell across the board while wages growth continued to ease.

"The Australian PMI® suggests that economic conditions have not bottomed in the economy and that the outlook remains uncertain. Business is hunkering down and hoping that conditions will improve in the second half of the year. Whether they will, remains to be seen," Mrs Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said "The Australian PMI® for March shows that there is no respite for manufacturing firms as the economic downturn in Australia and overseas adds to existing long-term pressures for strategic responses to the increasingly competitive global market in manufactures.

"The short-term pressure for change to maintain margins requires rapid responses to weaker demand including sustaining cash flow through effective pursuit of accounts receivable and where necessary cutting back and controlling expenses. For longer-term challenges, it is important to continue to focus on strategies designed to reduce long-term costs and boost productivity including through the retention of key skills, optimisation of supply chains and product and process innovation," Mr Billings said.

Australian PMI® Key Findings for March:

• The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian PMI® rose slightly, by 1.7 points to 33.4.
• The inventory adjustment process continued in March, with sales being partly drawn from existing stocks as new orders fell again. The associated decline in manufacturing production gathered further momentum in March and employment fell for the 13th consecutive month.
• Firms continue to point to weak domestic and global demand for manufactures, including from China; project cancellations; lack of credit availability; and competition from overseas products as the prime causes of the downturn in manufacturing.
• Input cost growth eased modestly in March, while selling prices remained essentially stable. Wages growth eased for the sixth consecutive month.
• Exports fell as global manufactures demand continues to decline.
• Manufacturing activity fell in all states except Tasmania where it rose slightly. The largest falls were recorded in New South Wales and South Australia.

Download the full March 2009 Australian PMI®.


Further Comment:
Heather Ridout, Ai Group: (02) 9466 5504
Graeme Billings, PricewaterhouseCoopers: (03) 8603 3007

Media Inquiries:
Tony Melville: (02) 6233 0700
Nina Anderson, PricewaterhouseCoopers: (03) 8603 3573


Background:
The Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) is a seasonally adjusted national composite index based on the diffusion indices for production, new orders, deliveries, inventories and employment with varying weights. An Australian PMI® reading above 50 points indicates that manufacturing is generally expanding; below 50, that it is declining. The distance from 50 is indicative of the strength of the expansion or decline. Australian PMI® results for the third month of each quarter are based on an expanded sample (in excess of 500 companies). Results for the other months are based on responses from over 200 companies.