Published 06-04-2021
| Article appears in April 2021 Issue

Australian PMI indicates strong recovery for manufacturing 

06-04-2021
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The strong recovery in Australian manufacturing gathered pace in March, according to the Australian Industry Group’s latest Australian Performance of Manufacturing Index.

The Australian PMI increased by a further 1.1 points to 59.9 in March, indicating a strong recovery for the sixth consecutive month and the index’s highest monthly result since March 2018.

Readings of above 50 points indicate expansion in activity, with higher results meaning a faster rate of expansion.

According to Ai Group chief executive Innes Willox there is growth across the full range of sectors in manufacturing, including machinery and equipment, textiles and clothing, footwear, printing and paper products.

“Employment growth surged with manufacturers’ confidence boosted by buoyant levels of new orders. The machinery and equipment sector benefitted from higher demand from across the industrial, mining and agricultural sectors while the metal products and building equipment sectors supplied into healthy levels of residential construction and infrastructure activity. Production and sales continued to expand despite pulling back from very rapid rates of growth in February,” explained Mr Willox.

He also adds that some growing pains are evident with deliveries of inputs not keeping up with sales of finished products and with reports of skill shortages becoming more widespread. 

“The challenge over the next couple of months will be to maintain momentum as fiscal support is wound back further and while Covid-19 remains a threat," Mr Willox said.

The key findings from the Australian PMI for March 2021 include: 

All seven activity indices in the Australian PMI expanded in March.

The new orders index is up 3.6 points to 63.5, suggesting further strong production in the coming months.

All six manufacturing sectors in the Australian PMI reported positive trading conditions, with especially buoyant conditions in the machinery & equipment (up 0.6 points to 65.0) and textiles, clothing, footwear, paper & printing products (up 3.5 points to 66.1) sectors.

The input prices index eased a little in March, down 2.8 points to 71.3, but remains above its long-run average 67.5 points. 

The selling prices index jumped to its highest level since 2008, up 8.5 points to 59.7, indicating that, on average, selling prices rose sharply in March and many manufacturers are passing on their elevated input costs.

The average wages index increased further in March, up 5.6 points to 63.8, taking it back above its long-run average, 58.6 points, after dropping sharply in 2020 due to Covid-19.

The Australian PMI, is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. 

Australian PMI results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors. 

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