Manufacturing expands, supply chain and labour constraints grow

manufacturing

The Ai Group’s Australian Performance of Manufacturing Index (Australian PMI) increased a further 2.8 points to 58.5 in April – the highest monthly result since July 2021, as Australian manufacturing continues its strong post-COVID recovery with a third consecutive month in positive territory. 

According to Ai Group chief executive, Innes Willox, the expansion is widespread with five out of six manufacturing sectors reporting improved performance during April. 

“Acceleration was highest in the chemicals and building product sectors. Across the broad manufacturing sector, production and domestic sales were both higher than in March, although a fall in exports saw an easing in the pace of improvement in total sales,” Willox said. 

“Employment fell in the month with many respondents reporting difficulties filling positions – particularly in skilled occupations. Price pressures continue with input prices and wages both rising further in April and selling prices edging higher, as manufacturers seek to recover cost increases in the market.” 

New orders further increased in April and as many businesses feel the capacity constraints and difficulties in securing inputs and staff, the pressures on filling orders are predicted to continue in the coming months. 

Key findings for April 

Five of the six manufacturing sectors in the Australian PMI expanded in April, with the TCF, paper and printing sector falling into contraction (down 17.2 points to 41.8) after recording elevated results in March, while the large food and beverage sector recovered, following four months of contraction (up 6.3 points to 53.2). The machinery and equipment sector fell sharply but remained in expansion (down 7.6 points to 52.6). 

Five of the seven activity indices in the Australian PMI expanded in April (see table below), with new orders (down 0.2 points to 64.8) and sales (down 7.5 points to 56.4) decelerating but remaining in strong expansion. The employment (down 6.3 points to 47.1) and exports (down 10.6 points to 47.7) indexes fell into contraction and slipped below their own long-run averages (49.1 points and 50.0 points respectively). 

The input prices index rose further in April (up 2.0 points to 84.4), due to high global commodity prices, indicating faster input price increases on average for manufacturers. Selling prices edged higher to record the index’s highest reading since 2008 (up 0.2 points to 72.2). 

The average wages index lifted marginally in April (up 0.3 points to 66.9), indicating a slightly faster pace of increase in wages across the manufacturing sector, on average, compared to March. 

manufacturing