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Solid Q2 start for Australian manufacturing

Staff Writer | May 2, 2018
The Australian manufacturing sector began the second quarter on a solid footing, underpinned by stronger growth of output and new orders.
Australian manufacturing
Australia   Commonwealth Bank Manufacturing PMI
Additional staff were recruited at a faster pace, while backlog accumulation accelerated amid intensified supply-chain pressures.

Material shortages, combined with unfavourable exchange rate movements, pushed up costs, encouraging businesses to raise selling prices.

The headline index from the survey, the seasonally adjusted Commonwealth Bank Manufacturing Purchasing Managers’ Index (PMI) – a composite indicator designed to measure the performance of the manufacturing economy – posted 55.5 in April, up from March’s six-month low of 54.3, signalling a stronger improvement in the health of the sector.

Moreover, the PMI was above its average.

April data pointed to a renewed acceleration in production growth, following three successive monthly slowdowns.

Australian goods producers raised output strongly amid a greater influx of new work.

Panellists attributed the rise in new business to improved client confidence and new contract wins.

Overall, the rate of new order growth was sharp and quicker than that seen in March.

At the same time, new export sales rose at the slowest pace seen across the current eight-month sequence of increase.

To accommodate for greater production requirements, purchasing activity rose at the fastest pace in four months.

Stronger input demand weighed on supplier performance however, with delivery times lengthening to a marked degree.

Difficulties in acquiring raw materials in a timely fashion also contributed to a further accumulation in backlogs of work.

Outstanding business rose at the quickest pace since January.

In order to manage higher workloads, and in anticipation of further growth, firms hired additional staff at a solid pace.

On the price front, cost burdens increased sharply in April.

According to anecdotal evidence, a weaker Australian dollar and higher raw material prices underpinned the latest bout of inflation.

This was partly offset by a rise in output prices, but the rate of increase in charges softened slightly.

Business confidence remained positive during April, with 64% of the survey panel forecasting higher output over the coming 12 months.

The degree of optimism eased to a seven-month low, but was relatively elevated.