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Austr PMI®: Manufacturing experiences moderate growth in April

05 May, 2008

Manufacturing experienced subdued growth in activity for the fourth consecutive month in April, with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rising slightly by 0.4 points to 52.7* (remaining above the key 50.0 level separating expansion from contraction).

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said the conditions facing the manufacturing sector continue to constrain growth.

“Growth in manufacturing activity was lacklustre again in April albeit characterised by a mixed performance, with some sectors doing better than others and mining and infrastructure development in particular putting a floor under activity.

“Weaker global growth is clearly creating more uncertainty, together with the impact of interest rates and higher input costs.  Manufacturers are waiting for something to happen and are uncertain about when solid growth is going to reassert itself,” Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said that the Australian PMI® result for April shows that the outlook for manufacturing profitability in 2008 is a tough one.

“Rising input cost pressures - notably in terms of energy and labour costs and the uncertainties around the outlook for interest rates due to ongoing inflationary pressure - will all put pressure on manufacturer’s profitability.  There is currently little sign of these pressures easing. Ongoing attention to raising productivity and cutting operating costs will be critical during 2008 and beyond,” Billings said.

Australian PMI® Key Findings for April:

- The Australian PMI® rose slightly, by 0.4 points to 52.7 following a 0.7 point rise in March.
- Manufacturing continues to feel the impact of higher interest rates, easing global growth and the high Australian dollar.
- Production grew moderately in April, while employment fell for the second consecutive month.
- Overall activity was also supported by a moderate lift in new orders and input deliveries.
- Stocks also rose, though more slowly than in March while exports growth eased.
- Consistent with other indicators, input cost price growth remained strong, selling prices growth remained solid, while growth in wages eased. Capacity utilisation (unadjusted) rose slightly.
- Manufacturers cited positive effects on activity from solid demand from miners and infrastructure development, and improved demand from the agricultural sector following recent rains.
- Negative effects on activity included weaker global growth, lack of skilled labour, raw material costs, the high $A, and Chinese competition.
- Manufacturing activity rose in all states except South Australia and Tasmania.
*New monthly seasonal adjustment factors were applied in April, affecting time series data of the Australian PMI® in previous months.

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