Australia’s manufacturing sector shrinks again in March


The Australian manufacturing sector has shrunk for the fourth consecutive month in March and remained deeply in contractionary territory despite the slight lift in performance.

Image credit: User: Vichaya Kiatying-Angsulee
Image credit: User: Vichaya Kiatying-Angsulee

The Australian Industry Group’s (Ai Group) Performance of Manufacturing Index (Australian PMI®) rose 0.9 points in the month to 46.3, but remained well below the 50 point mark which signals expansion.

According to the media release by the Ai Group, manufacturing production (up 1.6 points to 46.6) and new orders (up 1.7 points to 45.9) continued to decline, whereas manufacturing sales (up 1.0 point to 46.2) contracted for a tenth consecutive month.

The report revealed that only the manufacturing exports sub-index signalled expansion (down 2.2 points to 51.7 points), as the impacts of the lower dollar “continued to flow through”.

Ai Group’s Performance of Manufacturing Index also found that much of this growth in exports was concentrated in the food and beverages sub-sector, which is one of only four manufacturing sub-sectors to expand in March (down 0.7 points to 59.4).

The non-metallic mineral products sub-sector expanded for a fifth consecutive month (down 8.7 points to 57.4), while the printing and recorded media sub-sector rose by 10.3 points to 58.6 – posting its first expansion since December 2013.

Wood and paper products went marginally in expansionary territory  in March (up 8.6 points to 50.1), but textiles, clothing & furniture once again slipped to contraction (down 7.3 points to 48.6) after fourth months of expansion.

“The lower Australian dollar continues to boost manufacturing export volumes. However, despite stronger residential building activity and some easing of the intense pricing pressures from imports flowing from the lower dollar, weak local demand continues to weigh heavily on activity,” said Ai Group Chief Executive, Innes Willox.

“This month manufacturers noted the dampening impacts of further drops in mining construction; the progressive closure of automotive assembly; subdued business investment in equipment; and political uncertainties in Canberra and in NSW ahead of the state election. The other side of the lower value of the currency is that it is lifting prices for imported inputs and we expect it will take some time for manufacturers to adjust the arrangements – including offshoring – they put in place when the dollar was higher.”