The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) accelerated in March, jumping by 5.6 points to a record high of 63.1 in the month.

The Australian PMI has now extended its longest run of expansion since 2005 into its 18th month (readings above 50 indicate expansion in activity, with the distance from 50 indicating the strength of the increase). The previous record for the Australian PMI was 62.1 points recorded in May 2002. For the fifth consecutive month all seven activity sub-indexes in the Australian PMI expanded, with new orders (up 11.2 points to 66.6), employment (up 2.2 points to 60.0) and deliveries (up 10.6 points to 66.6) all recording record highs.

Queensland manufacturing is performing particularly well, with a reading of 73.8 points in March. Respondents in Queensland reported increased demand from a broad range of sectors including construction, mining, agriculture and renewables.

“The ascent of manufacturing reached new heights over the past month with strength evident across the sector in what is continuing welcome news for the industry,” said Ai Group Chief Executive Innes Willox. “Production grew beyond the strong levels recorded in February on the back of higher sales in domestic and overseas markets. Employment growth continued to increase with this sub-index of the Australian PMI reaching a record high in March. Manufacturers reported new orders coming in at a healthy pace, in part reflecting the pick-up of work in mining, infrastructure and building.”

Seven of the eight manufacturing sub-sectors expanded in March (according to trend data) with the remaining sub-sector, textiles, clothing & furniture, being stable (up 5.2 points to 49.8). Three sub-sectors reached record highs: petroleum, coal & chemicals (up 0.7 points to 66.1); metal products (up 4.0 points to 62.3); and machinery & equipment (up 1.8 points to 62.0).Capacity utilisation also reached a record high of 81.2% in March, boding well for future investment and/or employment as capacity issues can be addressed by an increase in capital and/or employing more workers.

“While production and sales volumes are very strong, continuing input price pressures – notably for energy; a revival of wage levels; and a further lift in the number of businesses reporting difficulty in hiring skilled staff, are combining to constrain margins and the capacity for further expansion,” Willox added. “These same pressures underline the importance to our economy of implementing policies to improve the competitiveness of our tax system.”