The strong Australian dollar together with weak domestic demand, rising overseas competition and the increasing cost of raw materials pushed the manufacturing sector back into the red in March, according to the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI).
Australian Industry Group Chief Executive, Heather Ridout, states the major factor by a long way pressuring Australian manufacturing is the high dollar and this is predicted to remain high for a protracted period of time.
“The result portends the challenging conditions ahead for the manufacturing sector. However, the resilience of the sector should not be underestimated,” she said.
"The fall in the forward-looking new orders sub-index suggests that the weakness across manufacturing looks set to continue in the near term,” said Ridout.
“Governments and the Reserve Bank need to be very mindful of these soft conditions in manufacturing when setting policies and interest rates. The upcoming Federal Budget will be an important opportunity to encourage skills development, innovation and capital investment in the sector,” said Ridout.
Australian PMI Key Findings for March:
• The latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) fell 3.2 points to 47.9 in March (readings below 50 indicate a contraction in activity).
• Manufacturers cited the strong Australian dollar, weakening domestic demand, rising overseas competition and the increasing cost of raw materials as factors behind March’s result.
• Clothing & footwear, food & beverages, textiles and fabricated metals were the sub-sectors that experienced the greatest downturn in the month.
• The new orders sub-index was down 3.2 points in March.
• Wages and input costs both expanded in the month.
• Production levels were up in March, with the sub-index registering 50.9.
• Queensland and Western Australia were the only two states to record manufacturing growth.