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Australian manufacturing activity picks up in March

27 April, 2006

Manufacturing activity expanded in March, with the Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI™) rising 6.5 points to 53.2.

Australian Industry Group

Moderate increases in exports, new orders and inventories all contributed to the rise in production.

Six of twelve sectors reported expansions in activity in March, up from two in the previous month.  Food & beverages reported the strongest growth, while activity also strengthened moderately in the basic metal products and fabricated metals sectors. Transport equipment reported the largest decline.

Ai Group Chief Executive, Heather Ridout, said while there were some encouraging signs in the March Australian PMI™ it was far too early to suggest a troughing, let alone a turnaround in conditions.

"The recent weakening of the dollar should provide some welcome relief for import competing sectors and support for exporters.

"However, further signs of stronger demand, an end to de-stocking and a broadening in growth across all sectors are needed.  Renewed rises in input costs and continued labour shedding are also contributing to ongoing uncertainty surrounding the outlook for the sector," Ridout said.

PricewaterhouseCoopers Industrial Products Leader, Graeme Billings, said manufacturers need to consider a wide range of strategies if growth is to be sustained in the industry and they are to remain internationally competitive.

"Manufacturers must continue to develop new sources of added value, whether it is through new products, more innovative processes or distribution arrangements, while at the same time remaining focused on stripping out unnecessary costs," Billings said.

Australian PMI™ Key Findings in March:

- The Australian PMI™ rose 6.5 points to 53.2. 
- Moderate increases in exports, new orders and inventories underpinned a rise in production.
- Growth strengthened in supplier deliveries, while employment fell for the ninth consecutive month.
- The increase in input costs was the strongest since November 2005. 
- Six of twelve sectors reported expansions in activity, up from two in February.
- Growth was strongest in food & beverages, while the largest fall was in transport equipment (the eighth monthly decline).
- Growth was again strongest in Western Australia. Activity also expanded in New South Wales and Queensland. Victoria and South Australia both recorded their third consecutive falls in activity.
- Australian PMI™ suggests growth in non-farm GDP of over 2.5% and growth in manufacturing production of over 1.0%. 

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