Manufacturing activity in Australia picked up pace in April, with the seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Performance of Manufacturing Index (Australian PMI) rising by 9.3 points to 59.8. The result was significantly above the 50-point level separating expansion from contraction, taking the Australian PMI to its highest level since May 2002.
Strong rises in production, new orders, inventories and input deliveries, combined with a solid lift in employment, drove the rise in the Australian PMI.
Selling prices remained essentially stable in April but input cost growth accelerated sharply, adding to pressure on margins, though wages growth eased back slightly.
Reflecting the overall improvement, all sectors across manufacturing, with the exception of clothing & footwear, recorded growth in activity in April. Manufactured exports rose modestly.
Activity rose in all states, except Tasmania, with the strongest performances in New South Wales and South Australia.
Survey respondents pointed to improved market conditions in the building, infrastructure and mining sectors as positive factors during April. The high Australian dollar, rising interest rates and input cost rises were the key negatives cited by firms.
Following an annual reanalysis of seasonal factors, each of the sub-indexes and composite indexes have been revised.
Sectors
Seasonally adjusted, 11 sectors saw growth in activity in April, up from eight in March. Of the sectors with links to construction and resources activity, construction materials; basic metal products; fabricated metal products; transport equipment; and wood, wood products & furniture saw growth strengthen in April. The chemicals, petroleum & coal products and machinery & equipment sectors saw growth ease. The food & beverages sector grew strongly following four months of falling activity; however, the other key consumer-related manufacturing sector, clothing & footwear, saw activity decline for a fourth consecutive month. Activity rose moderately in the miscellaneous manufactures and paper, printing & publishing sectors.
Production and capacity
Seasonally adjusted, the production sub-index rose sharply, by 15.3 points to 64.0. On an unadjusted basis, the number of sectors reporting higher production rose to nine in April, from four in March.
Growth was strongest in the textiles; basic metal products; paper, printing & publishing; and wood, wood products & furniture sectors. Production expanded more moderately in the food & beverages; transport equipment; miscellaneous manufactures; fabricated metal products; and chemicals, petroleum & coal products sectors.
The clothing & footwear sector saw a sharp fall in production, while construction materials and machinery & equipment saw more moderate falls.
Consistent with the rise in manufacturing production in April, capacity utilization rose, by 0.9 percentage points, to 74.9 percent.
New orders
In seasonally adjusted terms, the new orders sub-index rose solidly in April, by 7.3 points to 59.5, representing the fastest growth rate in orders since November 2007. Unadjusted, new orders increased in nine of the 12 sectors, up from five in March. Orders remained stable in the construction materials and machinery & equipment sectors.
The textiles; basic metal products; and paper, printing & publishing sectors saw the fastest rises in orders in April. The miscellaneous manufactures; wood, wood products & furniture; chemicals, petroleum & coal products; fabricated metal products; food & beverages; and transport equipment sectors saw moderate increases in new orders.
Only the clothing & footwear sector experienced a decline in new orders.
Employment and average wages
The seasonally adjusted employment sub-index rose by 7.3 points in April to 55.2, indicating moderate employment growth. In unadjusted terms, eight sectors saw employment growth in April, up from five in March, while employment was stable in the fabricated metal products sector.
The transport equipment; basic metal products; and chemicals, petroleum & coal products sectors recorded the largest employment growth in the month. Employment also rose moderately in the construction materials; food & beverages; textiles; miscellaneous manufactures; and wood, wood products & furniture sectors.
Employment fell solidly in the clothing & footwear and paper, printing & publishing sectors and moderately in machinery & equipment.
Average wages growth fell slightly in April, with the sub-index down 1.2 points to 57.1.
Finished stocks
Manufacturing inventories rose sharply in April, with the seasonally adjusted sub-index rising 12.8 points to 60.9. Unadjusted, eight sectors reported a rise in stocks in April, up from five in March.
Inventories rose most strongly in the food & beverages; machinery & equipment; clothing & footwear; and textiles sectors. More moderate rises were recorded in the transport equipment; paper, printing & publishing; basic metal products; and wood, wood products & furniture sectors. Stocks were stable in the fabricated metal products and chemicals, petroleum & coal products sectors.
The largest falls in inventories were in construction materials while they fell more moderately in miscellaneous manufactures.
Deliveries, input costs and selling prices
In seasonally adjusted terms, supplier deliveries rose strongly in April, with the sub-index rising 3.9 points to 59.1.
Unadjusted, deliveries rose in seven sectors, down from eight in March. The sectors seeing increases were textiles; basic metal products; transport equipment; food & beverages; chemicals, petroleum & coal products; fabricated metal products; and paper, printing & publishing.
Input price growth rose for a sixth successive month in April, the seasonally adjusted sub-index lifting sharply by 10.2 points to 73.1.
The largest input price increases were in chemicals, petroleum & coal products; textiles; and paper, printing & publishing. Selling prices were essentially stable, with the sub-index rising from 44.8 to 50.1.
The wood, wood products & furniture; construction materials; and fabricated metal products sectors saw the strongest rises in selling prices, while textiles saw the largest falls.