Australian manufacturing expands in April

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The Australian manufacturing sector racked up its 7th consecutive month of expansion in April, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) climbing 1.7 points to 59.2.

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According to Ai Group’s report, all seven activity sub-indexes in the Australian PMI expanded in April, with sales (up 7.8 points to 65.5), supplier deliveries (up 9.4 points to 62.3) and exports (up 7.5 points to 58.6) all surging higher than in March, while new orders declined by 1.1 points to 61.5.

The report also found that seven of the eight manufacturing sub-sectors expanded in April, with six sub-sectors exceeding 60 points.

The input prices sub-index increased a further 4.3 points in April to 69.8, while the wages sub-index increased by 4.4 points to a relatively elevated 58.4.

The findings also suggest that selling prices appear to be recovering, with the sub-index jumping 5.4 points to 58.9 – the highest result since September 2008.

Commenting on the report, Ai Group Chief Executive, Innes Willox, said:

“The strong showing by Australian manufacturing in April consolidates the recovery that has been underway in the industrial sector since August 2015 – notwithstanding a temporary setback in the September quarter of last year,” Mr Willox remarked.

“While not a new record, the April result means that since February (PMI 59.3 points) we have had the two highest PMI® readings since May 2002 (PMI 62.0).”

He said the positive April performance was driven by strong growth in exports and local sales of food and beverages manufacturing, building materials, specialist machinery and equipment and specialist chemicals.

“Resurgent output and prices in our agricultural and mining sectors are having a positive effect on demand for a range of locally produced manufactured equipment,” he continued.

“This surge is occurring despite the closure of the automotive assembly sector and recent disruptions in some locations due to Cyclone Debbie.”

However, Mr Willox also warned that the sharp rises in energy costs – and especially gas costs – are threatening this growth.

“These increases in energy costs are proving difficult to pass on, threatening margins and the very viability of businesses in some manufacturing sectors. Recent announcements on energy policy are welcome steps towards the much-needed comprehensive energy and climate policy framework,” Mr Willox concluded.