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Australian PMI®: Manufacturing industry output continues to fall

05 May, 2009

Australian manufacturing industry output fell for the eleventh consecutive month in April, continuing to trawl uncharted lows.

Producers cut inventories at the fastest rate in the index’s history in the face of a continuing drop in demand for new goods.

The seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) fell by 3.1 points to a record low of 30.1 which is well below the 50-point mark that separates expansion from contraction. The April Australian PMI® showed falls in all States.

Australian Industry Group (Ai Group) Chief Executive, Heather Ridout, said: “There was no let up for manufacturers in April, with weakness and uncertainty continuing to characterise the sector. Weak demand in both domestic and global markets contributed to the ongoing contraction of the sector. However, the inventory index is at record lows, which should suggest that production levels will have to lift soon to replenish stocks.

“The infrastructure roll-out and lift in housing starts have the potential to translate into new orders for local industry. However, a concerted effort to ensure that Australian-based companies are aware of the opportunities and have a fair and open access to them is important. Ai Group will be pushing this agenda,” Ridout said.

PricewaterhouseCoopers Global Leader of Industrial Manufacturing, Graeme Billings, said: “The April Australian PMI® clearly illustrates the ongoing squeeze on manufacturers’ profitability. Cutting back expenditure for marginal activities forms part of the strategy for underpinning profit margins until markets recover. However, looking beyond the downturn remains important for long-term profitability. Retaining skilled workers, building supply chains to reduce costs and innovation across processes and products remain critically important,” Billings said.

Australian PMI® Key Findings for April:

  • Following a review of seasonal adjustment factors, the seasonally-adjusted Australian Industry Group-PricewaterhouseCoopers Australian PMI® fell by 3.1 points to a historically low 30.1.
  • Manufacturing activity fell again in April, due to weakening domestic and overseas demand and a record winding back of stocks. The seasonally-adjusted new orders sub index fell 3.8 points to 26.7. 
  • Firms cited weak domestic and overseas orders as the main driver of the poor manufacturing climate. Some also pointed to a lack of credit, project cancellations, weak demand from the automotive sector and competitive pressures.
  •  Solid infrastructure demand, and, for firms affected by conditions in the agricultural sector, improved rains in some areas, are among the few positives. 
  • Input cost growth eased significantly again in April, while selling prices and wages both fell on average. Exports fell for the eighth consecutive month. 
  • Manufacturing activity fell in all States. The largest falls were recorded in Western Australia and South Australia.