Manufacturing activity on the rise

04-05-2010

Manufacturing picked up pace in April with the latest seasonally adjusted Australian Industry Group PricewaterhouseCoopers Australian Performance of Manufacturing Index (Australian PMI) rising 9.3 points to 59.8, well above the 50 point level separating expansion from contraction.

Healthier market conditions in the building and infrastructure sectors fuelled the growth with eleven sectors in positive territory last month. 

Clothing and footwear declined for the fourth consecutive month.  Employment rose significantly, with the sub-index up 7.3 points for an April reading of 55.2.

Australian Industry Group chief executive, Heather Ridout, said: "While the manufacturing sector still remains behind the levels of mid 2008, the encouraging results across much of the manufacturing sector in April are signs the recovery, which has been patchy to date, is now beginning to gain some traction.

"Although manufacturers are still battling severe headwinds in the form of the high dollar, the withdrawal of the fiscal stimulus and the return to 'normal' interest rates, the April Australian PMI shows a sector gaining lost ground as activity across the economy broadens. Reflecting continuing competitive pressures and the strength of the Australian dollar, exports are growing more modestly. In the near-term, the sector remains vulnerable to higher costs of financing and any reduction in demand that would flow from higher interest rates.”

Mrs Ridout warned there is no reason for complacency despite signs that a recovery is gathering pace.

The manufacturing sector faces fundamental challenges from emerging skills shortages and the commodity-fuelled Australian currency. 

“The coming Federal Budget presents an opportunity to address these challenges with active policy in the area of education and skills development, a resumption of pre-crisis levels of skilled immigration and far-sighted investments in innovation, research and development, business capabilities and export market development," Mrs Ridout said.

PricewaterhouseCoopers Global Head of Industrial Manufacturing, Graeme Billings, said: "The improvement in demand conditions facing manufacturing in April is welcome.  “However, profitability will remain under pressure, given the ongoing significant lift in input cost growth, which we have seen over recent months.  Manufacturers will need to sustain a strong focus on cost management over coming quarters particularly in the face of rising skills shortages."

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