The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) dropped by 17.9 points to 35.8 in April, recording the largest month-to-month fall in the 28-year history of the index as Australian manufacturing contracted at its worst pace since April 2009 (readings below 50 points indicate contraction in activity, with the distance from 50 indicating the strength of the decrease).
The sharp spike into positive conditions in March, on the back of the unusual surge in demand for manufactured food and groceries, was more than completely reversed in April. All activity indices plunged, with activity levels now reminiscent of the falls of 2009 during the Global Financial Crisis (GFC). Manufacturers cited a range of COVID-19 issues in April, with the most prevalent including: no new sales due to shutdowns; major customers cancelling orders; supply chain problems with inter-state freight movements and delays; and increased prices for raw materials.
“April 2020 was devastating for Australia’s manufacturers and their employees,” said Ai Group Chief Executive Innes Willox. “Sales plummeted, new orders fell precipitously, production was culled and employment fell more steeply than at any time since the Australian PMI was first launched in 1992.”
All seven activity indices in the Australian PMI contracted in April, with the sales (down 24.9 points to 31.6), production (down 16.5 points to 35.3), new orders (down 25.2 points to 32.7) and employment (down 21.7 points to 34.3) indices experiencing their largest month-to-month falls since each index began.
Four of the six manufacturing sectors in the Australian PMI contracted and two expanded in April. The large food & beverages sector remained in expansion, despite subsiding shopper stockpiling (down 1.6 points to 52.6), while the chemicals sector was the only sector to improve (up 1.3 points to 51.4). Traditional ‘heavy, industrial manufacturers’ reported retreating conditions
“Across the diverse manufacturing sector, the steepest deteriorations in performance were in sectors covering textiles, clothing, footwear, paper & printing; building, wood, furniture and other products; metal products; and machinery & equipment,” Willox remarked. “The large food & beverage products sector grew in April as did the chemicals sector which includes the production of many cleaning and sanitising products.”
The input prices index increased by a further 7.6 points to 71.6 in April, adding to March’s 6.6 point rise to indicate a sharp acceleration in manufacturing input costs. The selling prices index eased by 4.3 points to 50.7 in April, indicating that manufacturers’ selling prices were broadly stable across most sectors.
“Businesses are doing what they can in these extraordinarily stressful circumstances,” Willox added. “They are managing vastly different health and safety priorities; they are dealing with similarly stressed customers and suppliers; and they are pulling out all stops to ease the burden on their employees.
“The active support of the Federal Government and each of the state and territory governments is greatly appreciated, as is the overwhelmingly co-operative efforts of the manufacturing workforce. With new orders down to such low levels, and due to the widespread nature of this disruption, we hope but do not expect conditions to turn around in the next couple of months. The sector is determined to come out of this with renewed strength.”