Manufacturing News

Supply chain and labour issues constrain industry expansion

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The Ai Group Australian Performance of Manufacturing Index (Australian PMI) increased a further 2.5 points to 55.7 in March – the highest monthly result for the industry since July 2021. 

“The Australian manufacturing sector grew faster in March as manufacturers added new staff, lifted sales and continued to expand production (although at a slower pace than in February),” Ai Group chief executive Innes Willox said. 

“Five of the six manufacturing sectors saw improved performance with businesses in machinery and equipment, building products and the diverse textiles, clothing, footwear, paper and printing group leading the way.” 

The Australian PMI results show that the food and beverage sector, the largest area in Australian manufacturing, saw conditions deteriorate in March. 

Across the manufacturing industry, pressures from wages and input prices stepped up, but the growth of selling prices allowed manufacturers to recover some cost increases in the market. 

“There was an encouraging rise in new orders in March although with labour and input supply constraints growing, manufacturers will be stretched to fill orders in a timely way,” Willox said. 

Key findings for March 

Six of the seven activity indices in the Australian PMI expanded in March, with supplier deliveries the only index in contraction (down 3.3 points to 45.7). 

Production (down 1.2 points to 53.4) and inventories (down 2.4 points to 53.5) eased back slightly from more expansionary levels in February, while employment (up 9.9 points to 53.4), exports (up 15.7 points to 58.3) and sales (up 12.5 points to 63.9) all increased in March. 

An increase in the new orders index (up 5.2 points to 65.0) indicated further strong production can be expected in the coming months. 

Five of the six manufacturing sectors in the Australian PMI reported positive trading conditions during March, with buoyant conditions reported by manufacturers in machinery and equipment (up 3.3 points to 60.2), building materials (up 12.6 points to 61.0), and TCF, paper and printing products (up 6.7 points to 59.0). The food and beverage sector remained in contraction (down 0.5 points to 46.9). 

The input prices index rose further in March (up 6.8 points to 82.4), indicating faster input price increases on average for manufacturers. Selling prices edged higher to record the index’s highest reading since 2008 (up 0.4 points to 72.0). 

The average wages index increased in March (up 1.7 points to 66.6) reaching its highest level since the recent peak in 2021. 

To view the full report, click here

The Australian PMI is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. 

An Australian PMI reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. 

Australian PMI results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. The Australian PMI uses the ANZSIC industry classifications for manufacturing sub-sectors and sub-sector weights derived from ABS industry output data. Seasonally adjusted and trend data are calculated according to ABS methodology. 

More information about the history and methodology of the Australian PMI is available online. 

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