Aussie manufacturing sector records slower contraction in April – Judo Bank

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Australia’s manufacturing sector experienced a slight contraction in April, but the pace of deterioration was notably slower than in previous months, according to the latest data from Judo Bank’s PMI report.

The headline seasonally adjusted Judo Bank Australia Manufacturing Purchasing Manager’s Index (PMI) rose to 49.6 in April from 47.3 in March, marking the third consecutive month of decline but at a marginal pace – the lowest in the current sequence.

According to Judo Bank, this suggests that while challenges persist, the sector is beginning to stabilise.

Manufacturing activity improved sharply in April after a sustained period of cyclical weakness. The Flash manufacturing PMI rose back towards the neutral 50.0 level while output and new orders were both higher in the month,” stated Warren Hogan, chief economic advisor at Judo Bank.

One of the positive aspects of the report was the deceleration in the rates of contraction for new orders and production compared to the previous month.

Although incoming new orders for Australian manufacturing goods continued to decline, the pace of decline was the slowest in three months, indicating a potential easing of market conditions and the impact of elevated interest rates.

Similarly, production levels fell at a less aggravated rate in April, reaching the softest decline since September 2023.

This was accompanied by a weaker pace of depletion in backlogged work and relatively unchanged employment levels, with some firms even hiring additional workers to manage their workloads.

While challenges such as subdued market conditions and soft external demand persisted, there were indications of improvement.

Despite ongoing supply constraints, including disruptions in the Red Sea and a lack of input material availability, the pace of decline in purchasing activity eased.

Moreover, the moderation in input cost and output price inflation, although still present, remained below their respective series averages.

One of the most encouraging aspects of the report was the improvement in overall sentiment among Australian manufacturers.

With confidence levels climbing back above the rolling 12-month average, businesses expressed optimism about the potential for economic conditions to improve in the year ahead, supporting higher sales and output.

“The Judo Bank PMI highlights the resilience of the business sector in Australia. The business sector is continuing to hire and invest even as consumers remain cautious. While employment levels continue to expand in service industries, they remain soft for the manufacturing sector,” explained Hogan.