Manufacturing conditions improve at fastest pace since late 2022
Australia’s manufacturing sector performance improved at an accelerated pace in March. Rising new orders supported a renewal of production growth. Job creation also resumed, aiding the clearance of backlogged orders. Meanwhile, purchasing levels were increased for the first time since September 2022, contributing to a significant rise in inventory of purchases.
On the prices front, average input prices continued to rise at a steep rate in March, but output charge inflation eased despite reduced optimism regarding future output.
The seasonally adjusted S&P Global Australia Manufacturing Purchasing Manager’s Index™ (PMI®) increased to 52.1 in March, up from 50.4 in February. Remaining above the 50.0 neutral mark for the third consecutive month, the latest data indicated that conditions in the manufacturing sector continued to improve in March. Furthermore, the latest headline index was the highest recorded since October 2022.
Contributing to the increase in the headline index was manufacturing production, which expanded at its fastest pace since October 2022. The recent acceleration in output growth was driven by rising new business inflows and increased capacity. Australian manufacturers reported receiving new orders at the quickest rate in 28 months. Improved domestic economic conditions, marketing promotions, and client restocking supported the growth in new work, according to panellists. However, firms noted a renewed decline in export orders, reflecting subdued external conditions.
As a result of the increase in overall new business, Australian manufacturers hired additional staff. The job creation rate was the strongest in two years, with firms also reporting the filling of roles that had been shed earlier. The larger workforce capacity enabled another round of backlog clearance in March. However, the pace of backlog depletion was the slowest in 26 months.
“March’s manufacturing PMI data brought positive news, indicating the strongest improvement in manufacturing sector conditions in nearly two and a half years,” said Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence. “The latest expansions of new goods orders and output represented a nascent recovery for the sector. That said, some forward-looking indicators offered conflicting signals regarding growth in the coming months, with the level of business confidence notably easing in March.
“Overall, it was encouraging to see the rise in demand driving the fastest rise in employment in two years,” Pan added. “Firms were also seen willing to backfill positions that were left empty previously in anticipation of higher future production. Additionally, restocking at manufacturers were also observed in the latest survey period.
“Turning to prices, the reduction in selling price inflation is a positive development, but the squeeze on margins amid another steep rise in input prices will need to be monitored.”
The headline seasonally adjusted S&P Global Australia Manufacturing Purchasing Manager’s Index™ (PMI®) posted 52.1 in March, up from 50.4 in February. Posting above the 50.0 neutral mark for the third successive month, the latest data signalled that manufacturing sector conditions continued to improve in March. Moreover, the latest headline index was the highest seen since October 2022.
Manufacturing production contributed to the increase in the headline index, which also expanded at the most pronounced pace since October 2022. The latest acceleration in output growth was driven by rising new business inflows and increased capacity. Australian manufacturers reported receiving new orders at the fastest rate in 28 months. According to panellists, better domestic economic conditions, marketing promotions and client restocking underpinned the growth in new work. However, firms reported a renewed fall in export orders, reflective of subdued external conditions.