Australian manufacturing: March overview

Australian manufacturing

The Australian manufacturing sector expanded strongly again in March, achieving a PMI (Performance of Manufacturing Index) of 57.5 points.

In March, Australia’s PMI was down 1.8 points to register 57.5 points for the month (results above 50 indicate expansion with the distance from 50 points indicating the strength of expansion). This was the sixth consecutive month of expansion for the Australian PMI.

All seven activity sub-indexes in the PMI expanded in March. Expansions in new orders (62.6 points) and sales (57.7 points) strengthened. Production also expanded while slowing from more robust growth last month (57.6 points) as did employment (54.1 points). Deliveries (52.9 points) and exports (51.1 points) eased to more modest growth, while inventories turned up in March (55.5 points).

Image: AI Group
Image: AI Group
Image: AIGroup
Image: AIGroup

Out of the eight sub-sectors in the Australian PMI, five expanded while two contracted and one was broadly stable. The strongest growth was in non-metallic mineral products (64.8 points) and food and beverages (63.4 points). Metals products (59.5 points) and machinery and equipment (60.5 points) also strengthened in March, despite the ongoing exit of automotive assembly, which is included in machinery and equipment. Petroleum and chemical products was stable (50.9 points) while textiles and clothing (45.2 points) and printing and recorded media (48.5 points) remained in contraction.

Comments from manufacturers in March indicate that demand continues to recover.

Positive factors for demand include:

  • Higher prices for coal and other commodities
  • Large infrastructure projects
  • The NBN rollout
  • Stronger defence spending
  • Stronger activity in the agricultural sector

However, energy prices (particularly electricity) continue to affect manufacturers. Concerns about energy pricing and security of supply are eroding profitability and confidence. Other input prices are increasing (including steel prices), which is putting manufacturers’ margins under further pressure. Export growth also appears to be easing off for some manufacturers, compared to the strong surge of exports seen in 2016.

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