The pace of recovery in the Australian manufacturing sector eased in March. The seasonally adjusted Australian Industry Group-PricewaterhouseCoopers Australian Purchasing Managers’ Index fell by 3.6 points in March to 50.2, just above the 50-point level separating expansion from contraction.
Declines in production, employment and inventories combined with slower growth in new orders drove the fall in the Australian PMI.
Selling prices fell solidly in March while input cost and wages growth picked up pace, continuing the squeeze on manufacturers’ margins.
Consumer-related sectors, including food & beverages and clothing & footwear, again saw lower levels of activity, while sectors driven in part by infrastructure and resources demand generally saw growth ease in March. On a positive note, exports rose for a third consecutive month.
Activity rose in all states, except Victoria, which saw a slight fall. The strongest performances were seen in Western Australia and South Australia.
Survey respondents pointed to modest domestic and global sales conditions and the negative impact of the high Australian dollar exchange rate and rising interest rates. Demand from the resources sector is rising while some respondents have seen a softening in commercial and engineering related construction demand.
Sectors
Seasonally adjusted, eight sectors saw growth in activity in March, as in February. Growth was strongest in the textiles and wood, wood products & furniture sectors, possibly reflecting recent gains in housing construction. Most of the construction and resources related sectors, basic
metal products; fabricated metal products; transport equipment; and chemicals, petroleum & coal products saw growth continue, though at slower rates. However, the construction materials sector saw its first fall in activity in seven months.
The food & beverages and clothing & footwear sectors, where consumers have felt the impact of higher interest rates and fading fiscal stimulus, saw activity contract again.
Activity rose moderately in the miscellaneous manufactures and machinery & equipment sectors and fell in paper, printing & publishing.
Production and capacity
Seasonally adjusted, the production sub-index fell by 6.5 points to 49.2, as manufacturing production levels dropped slightly. On an unadjusted basis, the number of sectors reporting higher production fell to four from six in February, while five sectors saw stable production.
Growth was strongest in the textiles, wood, wood products & furniture; and transport equipment sectors. Production expanded more moderately in the machinery & equipment sector.
Production was stable in the clothing & footwear; chemicals, petroleum & coal products; basic metal products; fabricated metal products; and miscellaneous manufactures sectors.
Food & beverages saw a sharp fall in production, while construction materials and paper, printing & publishing saw more moderate falls.
Consistent with the slight fall in manufacturing production in the month, capacity utilization fell marginally in March, by 0.1 percentage point to 74.0 percent.
New orders
In seasonally adjusted terms, the new orders sub-index fell in March, by 5.1 points to 50.9, reflecting slower growth in orders. Unadjusted, new orders increased in five of the 12 sectors. This is down from nine in February.
The wood, wood products & furniture; textiles; and chemicals, petroleum & coal products sectors saw the fastest rises in orders in March.
The transport equipment and machinery & equipment sectors saw solid increases in new orders.
The heaviest falls in new orders were experienced in the clothing & footwear; paper, printing & publishing; miscellaneous manufactures; and construction materials sectors. More moderate falls in orders were seen in the fabricated metal products; basic metal products; and food & beverages sectors.
Employment and average wages
The seasonally adjusted employment sub-index fell by 2.6 points in March to 47.1, continuing the past quarter’s modest falls in employment. In unadjusted terms, five sectors saw employment growth in March, as in February, while employment was stable in the chemicals, petroleum & coal products and miscellaneous manufactures sectors.
The paper, printing & publishing; food & beverages; clothing & footwear; and textiles sectors recorded the largest employment falls in the month. Employment also fell moderately in the construction materials sector.
Employment rose solidly in the fabricated metal products; basic metal products; wood, wood products & furniture; machinery & equipment; and transport equipment sectors.
Average wages growth rose slightly in March, with the sub-index up 1.0 point to 58.3.
Finished stocks
Manufacturing inventories fell marginally more quickly in March, with the seasonally adjusted sub-index falling 1.1 points to 47.9. Unadjusted, seven sectors reported a depletion in stocks in March, up from six in February.
Inventories were run down most strongly in the construction materials; food & beverages; and transport equipment sectors. More moderate falls were recorded in the wood, wood products & furniture; chemicals, petroleum & coal products; miscellaneous manufactures; and basic metal products sectors.
The largest rises in inventories were in paper, printing & publishing; textiles; and clothing & footwear.
Stock levels also rose slightly in the fabricated metal products and machinery & equipment sectors.
Deliveries, input costs and selling prices
In seasonally adjusted terms, supplier deliveries rose slightly more quickly in March, with the sub-index rising 0.8 points to 55.8. Unadjusted, deliveries rose in eight sectors, up from seven, in March. The sectors seeing increases were textiles; miscellaneous manufactures; paper, printing & publishing; chemicals, petroleum & coal products; wood, wood products & furniture; basic metal products; transport equipment; and machinery & equipment.
Input price growth accelerated for a fifth successive month in March, the seasonally adjusted sub-index lifting 0.5 points to 62.9. The largest input price increases were in clothing & footwear; wood, wood products & furniture; and paper, printing & publishing. Selling prices fell sharply, with the sub-index falling from 52.3 to 44.8.
Only the miscellaneous manufactures sector reported selling price rises in March, while in food & beverages and chemicals, petroleum & coal products they remained stable.
