The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased by a further 1.1 points to 59.9 in March, indicating a sixth consecutive month of strong recovery and the Index’s highest monthly result since March 2018.
All seven activity indices in the Australian PMI expanded in March (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion), with the new orders index (up 3.6 points to 63.5) suggesting further strong production in the coming months. All six manufacturing sectors in the Australian PMI reported positive trading conditions, with especially buoyant conditions in the machinery & equipment (up 0.6 points to 65.0) and textiles, clothing, footwear, paper & printing products (up 3.5 points to 66.1) sectors.
“The strong recovery in Australian manufacturing gathered further pace in March, with growth across the full range of sectors,” said Ai Group Chief Executive Innes Willox. “Production and sales continued to expand despite pulling back from very rapid rates of growth in February. Employment growth surged with manufacturers’ confidence boosted by buoyant levels of new orders.
“The machinery & equipment sector benefitted from higher demand from across the industrial, mining and agricultural sectors, while the metal products and building equipment sectors supplied into healthy levels of residential construction and infrastructure activity.”
The input prices index eased a little in March (down 2.8 points to 71.3) but remains above its long-run average (67.5 points). The selling prices index jumped to its highest level since 2008 (up 8.5 points to 59.7) indicating that, on average, selling prices rose sharply in March and many manufacturers are passing on their elevated input costs. The average wages index increased further in March (up 5.6 points to 63.8), taking it back above its long-run average (58.6 points) after dropping sharply in 2020 due to COVID-19.
“Some growing pains are evident with deliveries of inputs not keeping up with sales of finished products and with reports of skill shortages becoming more widespread,” Willox added. “The challenge over the next couple of months will be to maintain momentum as fiscal support is wound back further and while COVID-19 remains a threat.”