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Australian PMI®: Toughest manufacturing conditions since the Global Financial Crisis

The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) dropped by 17.9 points to 35.8 in April, recording the largest month-to-month fall in the 28 year history of the index as Australian manufacturing contracted at its worst pace since April 2009 (readings below 50 points indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).

The sharp spike into positive conditions in March, on the back of the unusual surge in demand for manufactured food and groceries, was more than completely reversed in April. All activity indices plunged, with activity levels now reminiscent of the falls of 2009 during the Global Financial Crisis (GFC).

Manufacturers cited a range of COVID-19 issues in April, with the most prevalent including: no new sales due to shutdowns; major customers cancelling orders; supply chain problems with inter-state freight movements and delays; and increased prices for raw materials.

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Ai Group Chief Executive Innes Willox said: "April 2020 was devastating for Australia's manufacturers and their employees. Sales plummeted, new orders fell precipitously, production was culled and employment fell more steeply than at any time since the Australian PMI® was first launched in 1992. Across the diverse manufacturing sector, the steepest deteriorations in performance were in sectors covering textiles, clothing, footwear, paper & printing; building, wood, furniture and other products; metal products; and machinery & equipment. The large food & beverage products sector grew in April as did the chemicals sector which includes the production of many cleaning and sanitising products. Businesses are doing what they can in these extraordinarily stressful circumstances. They are managing vastly different health and safety priorities; they are dealing with similarly stressed customers and suppliers; and they are pulling out all stops to ease the burden on their employees. The active support of the federal government and each of the state and territory governments is greatly appreciated as is the overwhelmingly cooperative efforts of the manufacturing workforce. With new orders down to such low levels and due to the widespread nature of this disruption, we hope but do not expect conditions to turn around in the next couple of months. The sector is determined to come out of this with renewed strength," Mr Willox said.

Australian PMI®: Key Findings for April

  • All seven activity indices in the Australian PMI® contracted in April, with the sales (down 24.9 points to 31.6), production (down 16.5 points to 35.3), new orders (down 25.2 points to 32.7) and employment (down 21.7 points to 34.3) indices experiencing their largest month-to-month falls since each index began.
  • Four of the six manufacturing sectors in the Australian PMI® contracted and two expanded in April. The large food & beverages sector remained in expansion, despite subsiding shopper stockpiling (down 1.6 points to 52.6), while the chemicals sector was the only sector to improve (up 1.3 points to 51.4). Traditional 'heavy, industrial manufacturers' reported retreating conditions (see table below).
  • The input prices index increased by a further 7.6 points to 71.6 in April, adding to March's 6.6 point rise to indicate a sharp acceleration in manufacturing input costs.
  • The selling prices index eased by 4.3 points to 50.7 in April, indicating that manufacturers' selling prices were broadly stable across most sectors.

View all Economic Indicators 

Seasonally adjusted

Index this month

Change from last month

Long-run average

Trend

Index this month

Change from last month

Long-run average

Australian PMI®

35.8

-17.9

50.5

Food & beverages

52.6

-1.6

53.5

Production

35.3

-16.5

51.2

Machinery & Equipment

40.4

-2.1

49.6

Employment

34.3

-21.7

48.8

Metals products

34.4

-0.9

47.2

New Orders

32.7

-25.2

51.2

Petroleum, coal, chemicals & rubber products

51.4

1.3

51.3

Supplier Deliveries

38.8

-9.5

50.9

Building, wood, furniture & other

35.6

-1.1

50.0

Finished Stocks

45.2

-4.0

49.6

Textiles, clothing, footwear, paper & printing

30.2

-3.3

46.4

Exports

42.6

-2.0

50.0

       

Sales

31.6

-24.9

49.1

       

Input prices

71.6

7.6

67.6

       

Selling prices

50.7

-4.3

48.1

       

Average wages

49.5

-8.4

59.0

       

Capacity utilisation (%)

71.3

-3.3

73.7

       
Results above 50 points indicate expansion. * All indexes for sectors in the Australian PMI® are reported in trend terms (Henderson 13-month filter).
 
Background: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI® reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Australian PMI® results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI® uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. The Australian PMI® commenced in 1992. More information about the history and methodology of the Australian PMI® is available online.

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Media Enquiries
Tony Melville: 0419 190 347