Despite Rises in Some Sectors, Overall Manufacturing Remains Negative

6 May 11

Significant declines across transport equipment, textiles and miscellaneous manufacturing, largely due to the strong Australian dollar, kept the manufacturing sector in negative territory in April according to the latest Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®). The seasonally adjusted index rose just 0.5 points to 48.4 to remain below the 50 point level separating expansion from contraction.

New orders fell again in the month, with nine out of the twelve sub-sectors experiencing a decline. While overall manufacturing production expanded in April, selling prices slipped lower (down 8.7 points to 46.0).

Australian Industry Group Chief Executive, Heather Ridout, said: "The continued weakness of the Australian PMI® reflects consumer caution and the substantial erosion in the competitiveness of the industry related to the volatile and rising dollar. The uncertainty of how this will evolve is the essence of the pressures on the industry.

"Next week's Federal Budget needs to address this critical uncertainty in what is a key and big employing sector of the national economy. There is clearly a requirement for more proactive policies to build productivity in manufacturing through investments in workforce development; energy efficiency; the exploration of export opportunities and R&D," Mrs Ridout said.

PwC Global Head of Industrial Manufacturing, Graeme Billings, said: "Manufacturers are facing a most testing environment due to the strength of the exchange rate and consumer caution. April did see some positive movements in some manufacturing sub-sectors such as building materials, basic metals, food & beverages and machinery & equipment. These signs are, however, very tentative and are overshadowed by the flatness or contraction across the remaining sub-sectors.

"Against this background, it is imperative for businesses to maintain the search for new opportunities, new markets, new product lines and new sources of industrial efficiency," Mr Billings said.

Australian PMI® Key Findings for April:

- The April Australian Industry Group – PwC Australian Performance of Manufacturing Index (Australian PMI®) rose just 0.5 points to 48.4 in the month to remain below the 50 point level separating expansion from contraction.
- The strong Australian dollar largely contributed to the weaker activity including the significant declines across transport equipment, textiles and miscellaneous sub-sectors.
- Mining-related sub-sectors including basic metals, construction materials and machinery & equipment expanded in April.
- Seven of the 12 sub-sectors recorded declines in activity in April.
- The new orders sub-index continued to contract, down 2.7 points to 46.4.
- Manufacturing production improved with the sub-index rising by 2.4 points to 53.3.
- The selling prices sub-index was down sharply in April to 46.0.
- Manufacturing expanded in New South Wales, South Australia and Tasmania.
 

Download the full April 2011 Australian PMI®