Manufacturing activity continues to grow

AUSTRALIA'S manufacturing sector recorded another positive result in February with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) rising 2.8 points to 53.8 (readings above the 50.0 point level indicate an expansion in activity).

AUSTRALIA’S manufacturing sector recorded another positive result in February with the Australian Industry Group – PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) rising 2.8 points to 53.8 (readings above the 50.0 point level indicate an expansion in activity).

Stronger production and input deliveries and a solid growth in new orders fuelled the growth in manufacturing in February. However survey respondents continue to point to the high exchange rate and weak retail sales as constraints on activity.

While inventories fell at a slower rate while employment was essentially stable in the month.

The PMI revealed selling prices rose for the first time in five months and wages growth eased, however, input costs rose for a fourth consecutive month.

By sector and seasonally adjusted, eight sectors reported growth in activity, up from six in January.

Growth was strongest in Paper, Printing & Publishing and Textiles sectors, while the construction and resources related sectors, Basic Metal Products; Transport Equipment; Chemicals, Petroleum & Coal Products; Fabricated Metal Products; and construction materials sectors continued the improvement of recent months with solid gains.

The Machinery & Equipment sector grew marginally, however, the consumer-related sectors of Food & Beverages and Clothing & Footwear exposed to higher interest rates and fading fiscal stimulus, saw activity contract.

Activity also fell moderately in the Wood, Wood Products & Furniture and Miscellaneous Manufactures sectors

Around the country, activity rose in all states, with the strongest performances again in South Australia; Queensland; and Western Australia.

Australian Industry Group Chief Executive, Heather Ridout, said February’s Australian PMI represents an encouraging outcome for the manufacturing sector.

“And while there is a lot of ground lost over the past two years still to be recovered, overall, conditions do appear to be improving.

“The combination of rising new orders and production augers well for the industry in coming months,” she said.

“However, employment remained lacklustre reflecting the still patchy nature of growth with continuing weak results in some five out of twelve manufacturing sectors.

“Those sectors exposed to the construction and resources sectors are showing signs of stronger activity while consumer related sectors have weakened.

“The impact of the strong Australian dollar and higher interest rates are posing formidable headwinds to growth while high interest rates are also dampening demand,” Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said signs of improving markets for manufacturers’ products are a positive sign for a sector whose margins remain under significant pressure.

“This pressure was again illustrated by the fourth consecutive rise in input cost growth.

“The enduring message for manufacturers under strong competitive pressure from imports and the higher Australian dollar is to focus on constraining costs growth through operational innovation, increased efficiency and boosting integration into global supply chains,” Billings said.