Australian manufacturing growth strongest since 2004

By: Brad Lockyer

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  • Plant & Equipment

manufacturing gallery The Australian PMI for March showed the largest rate of growth since 2004 manufacturing gallery

The Australian manufacturing sector has reason to smile with March’s Ai Group Australian Performance of Manufacturing Index (Australian PMI) showing the strongest monthly growth figures since April 2004.

 The index showed an overall rise of 4.6 points to 58.1 for March, the ninth straight month the index has improved. Readings above 50 indicate growth and the distance from 50 shows the strength of that growth.

Of particular note is the machinery and equipment subsector, which showed growth for the first time in four years, after the sector was hit hard by the decline of the mining boom and the demise of Australia’s automotive manufacturing industry.

Five of the eight manufacturing subsectors showed expansion, led by the food, beverages and tobacco sector which recorded an increase of 9.3 points to 71 points and the wood & paper sector which jumped 8 points to 65.1.

Much of the growth can be attributed to the lower Australian dollar, which is currently around 30 per cent lower against the US dollar compared to three years ago. This has translated to total new orders increasing by 9.3 points, supplier deliveries increasing by 3.2 points and employment up by 5.8 points.

"The strong manufacturing performance and its expansionary run since the middle of 2015 are in large part due to the boost provided by the lower Australian dollar," Ai Group chief executive Innes Willox says.

"The positive impacts of this depreciation have taken some time to accumulate as businesses have become more confident that it will be sustained. With momentum positive and new orders growing strongly, the positive trend appears to have some way to run."

The news wasn’t all good however; average wages were down 2.6 points for the month and selling prices down 0.5 points. Willox also warns that the Australian dollar’s recent lift may have some negative effects.

"The sharp lift in the value of the Australian dollar over the past two and a half months (by 10 per cent against the US dollar and by over 7 per cent against the TWI) will test some manufacturers and, if maintained, can be expected to slow the pace of recovery over the months ahead," he says.

 

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