The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) fell 4.8 points to 58.3 in April, indicating a slower – but still buoyant – rate of expansion following March’s record high.
April marked a 19th consecutive month of expanding or stable conditions for the Australian PMI – the longest run of continuous expansion since 2005. Readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase . Six of the eight manufacturing sub-sectors expanded in April (according to trend data), with four sub-sectors reaching record highs in trend terms: machinery & equipment (up 1.0 point to 61.2); petroleum, coal & chemicals (up 0.4 points to 67.6); metal products (up 1.6 points to 63.8); and textiles, clothing & furniture (up 5.6 points to 57.1).
Ai Group Chief Executive Innes Willox said: “The manufacturing sector extended its broad-based expansionary run in April. Growth was led by the machinery & equipment; metal products; coal, petroleum, chemical & rubber products; and non-metallic mineral product sub-sectors, all of which are enjoying strong demand from high levels of building and construction activity. The largest manufacturing sub-sector – food & beverages – continued its long run of expansion. In a welcome sign, the diverse textiles, clothing, furniture & other products sector built on recent upward momentum.”
Five of the seven activity sub-indexes in the Australian PMI expanded in April, but at a slower pace than in March (see table below). New orders (down 5.0 points to 61.6), production (down 0.1 points to 62.1) and sales (down 1.4 points to 62.5) remained above 60 points, indicating healthy demand and a strong likelihood of further near-term growth.
Capacity utilisation eased from March’s record high (down 1.3 percentage points to 79.9%) but remains high by historical standards, suggesting some manufacturers will need more investment and/or employment in order to meet future growth in demand. The input prices (down 6.0 points to 62.5) and wages (down 3.1 points to 60.3) sub-indexes both slowed in April but remain elevated, with the selling prices sub-index rising 5.3 points to 57.5 as some of these cost pressures are passed on to manufacturers’ customer base.
“While the Australian PMI reading of 58.3 indicated a slower pace of expansion than March’s record high, domestic sales, production, new orders and employment all built on recent gains,” Willox added. “Respondents reported a slight drop in exports in April which warrants monitoring in the months ahead while energy costs and continued uncertainty over energy policy continue to be a major concern for many manufacturers.”