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Australian PMIĀ®: Manufacturing strengthens in April

The Australian manufacturing sector continued its recent recovery in April, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) climbing 1.7 points to 59.2 (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase). This was the seventh consecutive month of expansion for the Australian PMI®.

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Ai Group Chief Executive, Innes Willox, said: "The strong showing by Australian manufacturing in April consolidates the recovery that has been underway in the industrial sector since August 2015 – notwithstanding a temporary setback in the September quarter of last year. While not a new record, the April result means that since February (PMI® 59.3 points) we have had the two highest PMI® readings since May 2002 (PMI® 62.0).

"The April performance featured strong growth in exports and local sales of food and beverages manufacturing, building materials, specialist machinery and equipment and specialist chemicals. Resurgent output and prices in our agricultural and mining sectors are having a positive effect on demand for a range of locally produced manufactured equipment. This surge is occurring despite the closure of the automotive assembly sector and recent disruptions in some locations due to Cyclone Debbie.

"The outlook is not smooth however. Sharp rises in energy costs – and especially gas costs – are threatening this growth. These increases in energy costs are proving difficult to pass on, threatening margins and the very viability of businesses in some manufacturing sectors. Recent announcements on energy policy are welcome steps towards the much-needed comprehensive energy and climate policy framework," Mr Willox said.

Australian PMI®: Key Findings for April:

  • All seven activity sub-indexes in the Australian PMI® expanded in April (see table below), with new orders remaining elevated (down 1.1 points to 61.5) while sales (up 7.8 points to 65.5), supplier deliveries (up 9.4 points to 62.3) and exports (up 7.5 points to 58.6) surged higher.
  • Seven of the eight manufacturing sub-sectors expanded in April (trend data*), with six sub-sectors exceeding 60 points.
  • The input prices sub-index increased a further 4.3 points in April to 69.8, with respondents again highlighting soaring energy prices as a key cost increase in recent months. The wages sub-index increased by 4.4 points to a relatively elevated 58.4.
  • Selling prices appear to be recovering, with the sub-index jumping 5.4 points to 58.9 – the highest result since September 2008. While manufacturers may be regaining some ability to pass on cost increases, this result may point to more inflationary conditions as opposed to improved margins.

View all Economic Indicators

Seasonally adjusted

Index this month

Change from last month

12 month average

 

Index this month

Change from last month

12 month average

Australian PMI®

59.2

+1.7

53.6

Exports

58.6

+7.5

54.8

Production

60.7

+3.1

54.0

Sales

65.5

+7.8

55.0

New Orders

61.5

-1.1

56.5

Input Prices

69.8

+4.3

63.8

Employment

55.9

+1.8

50.5

Selling Prices

58.9

+5.4

52.0

Inventories (stocks)

51.2

-4.3

50.4

Average Wages

58.4

+4.4

58.2

Supplier Deliveries

62.3

+9.4

53.6

Cap. Utilisation (%)

77.4

-1.7

74.9

Background: The Australian Industry Group 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 are based on responses from around 200 companies from a rotating sample of manufacturers. The manufacturing sub-sector categories in the PMI match the ANZSIC industry classifications for manufacturing and are weighted, based on 2011-12 industry output data from the ABS.

Media Enquiries: Tony Melville – 0419 190 347