The expansion of the Australian manufacturing sector continued in April although its level eased following a 12-year high in March, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) dropping 4.7 points to 53.4 (readings above 50 indicate expansion in activity and the distance from 50 indicates the strength of the increase).

The Australian PMI expanded for a tenth straight month in April – the longest unbroken period of growth since September 2006. As in March, five of the eight manufacturing sub-sectors expanded (that is, above 50 points in three-month moving averages). The large food, beverages & tobacco sub-sector continued to lead the way, adding 3.1 points to reach a record high of 74.1. Wood & paper products also strengthened (up 0.8 points to 65.8), as did non-metallic mineral products (up 7.0 points to 57.5).

However, the March recovery in the machinery & equipment sub-sector was short-lived, with this key sub-sector moving back into contraction in April (down 3.1 points to 47.8).

Of the seven activity sub-indexes, all expanded except employment (down 4.2 points to 49.0). Production (down 3.2 points to 56.8), sales (down 2.7 points 56.8) and stocks (up 2.0 points to 56.7) all expanded strongly while new orders maintained mild expansion, albeit at a slower pace (down 9.6 points to 52.4). The input prices sub-index fell by 6.4 points to 57.3, suggesting an easing in input price growth related to the recent appreciation of the Australian dollar. Wages growth strengthened, rising 3.6 points to 57.4. The manufacturing selling prices sub-index continued a downward trend, slipping 2.7 points to 45.1. This reflects manufacturers’ efforts to combat increasing competition from international players.

“The current expansion in manufacturing is a much-needed turnaround for a sector that has been through a very tough decade,” said Ai Group Chief Executive Innes Willox. “While margins remain tight, recovering domestic market share and building momentum in a variety of export markets provide a strong foundation for the lift in confidence required for the sector to move up another gear. A budget that boosts incentives for business investment and innovation would come at just the right time for manufacturers to capitalise on recent gains.”