Manufacturing Sector Continues to Improve

1 Mar 10

The manufacturing sector recorded another positive result in February with the Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) rising 2.8 points to 53.8 (readings above the 50.0 point level indicate an expansion in activity).

Manufacturing growth was supported by a welcome lift in new orders which flowed on to stronger production and input deliveries for the month. Selling prices rose for the first time in five months while input costs also increased. Companies linked to the housing and resources sector grew solidly for a second consecutive month in February.

Australian Industry Group Chief Executive, Heather Ridout, said: "February's Australian PMI® represents an encouraging outcome for the manufacturing sector and while there is a lot of ground lost over the past two years still to be recovered, overall, conditions do appear to be improving.

"The combination of rising new orders and production augers well for the industry in coming months. However, employment remained lacklustre reflecting the still patchy nature of growth with continuing weak results in some five out of twelve manufacturing sectors. Those sectors exposed to the construction and resources sectors are showing signs of stronger activity while consumer related sectors have weakened. The impact of the strong Australian dollar and higher interest rates are posing formidable headwinds to growth while high interest rates are also dampening demand," Mrs Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "Signs of improving markets for manufacturers' products are a positive sign for a sector whose margins remain under significant pressure. This pressure was again illustrated by the fourth consecutive rise in input cost growth. The enduring message for manufacturers under strong competitive pressure from imports and the higher Australian dollar is to focus on constraining costs growth through operational innovation, increased efficiency and boosting integration into global supply chains."

Australian PMI® Key Findings for February:

• The seasonally adjusted Australian Industry Group - PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI®) lifted 2.8 points in February to 53.8, above the critical 50.0 level separating expansion from contraction.
• Stronger production and input deliveries, driven by a lift in new orders, fuelled February's result.
• Although the new orders sub-index remained stable at 56.0 in February, nine out of the twelve sectors recorded a lift in new orders, up from six in January.
• The employment index lifted slightly (2.6 points) but employment prospects remain relatively lacklustre.
• Growth was strongest in the paper, printing & publishing and textiles.
• Sectors linked to the housing and resources sectors, including construction materials; transport equipment and chemicals, petroleum & coal products, grew solidly in February.
• Manufacturers point to the high exchange rate and weak retail sales as limiting growth.

Download the full February 2010 Australian PMI®.