The Australian manufacturing sector expanded strongly again in March with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI® ) down 1.8 points to register a solid 57.5 points in the month (results above 50 indicate expansion with the distance from 50 points indicating the strength of expansion). This was the sixth consecutive month of expansion for the Australian PMI® .
All seven activity sub-indexes in the Australian PMI® expanded in March (seasonally adjusted). Expansions in new orders (62.6 points) and sales (57.7 points) strengthened. Production expanded while slowing from more robust growth last month (57.6 points) as did employment (54.1 points). Deliveries (52.9 points) and exports (51.1 points) eased to more modest growth, while inventories turned up in March (55.5 points).
Five of the eight sub-sectors in the Australian PMI® expanded in March (trend) while two contracted and one was broadly stable. The strongest growth was in non-metallic mineral products (64.8 points) and food & beverages (63.4 points). Encouragingly, metals products (59.5 points) and machinery & equipment (60.5 points) strengthened in March, despite the ongoing exit of automotive assembly, which is included in machinery & equipment. Petroleum & chemical products was stable (50.9 points) while textiles & clothing (45.2 points) and printing & recorded media (48.5 points) remained in contraction.
Comments from manufacturers in March indicate that demand continues to recover. Positive factors for demand include: higher prices for coal and other commodities; large infrastructure projects; the NBN rollout; stronger defence spending and stronger activity in the agricultural sector. Energy prices (particularly electricity) continue to play havoc with manufacturers. Concerns about energy pricing and security of supply are eroding profitability and confidence. Other input prices are increasing (including steel prices), which is putting manufacturers’ margins under further pressure. Export growth appear to be easing off for some manufacturers, compared to the strong surge of exports seen in 2016.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
