Manufacturing grows at fastest pace in almost 8 years
Activity in the manufacturing sector expanded at its fastest pace in nearly eight years in April on the back of stronger building and infrastructure sectors, according to the Australian Manufacturing Technology Institute Limited (AMTIL) magazine article reproduced below.
“The Australian Industry Group-PricewaterhouseCoopers performance of manufacturing index (PMI) rose 9.3 index points to 59.8 points in April.
It was the highest reading for the PMI since May 2002.
A reading above 50 indicates expansion. The distance from 50 is indicative of the strength of the expansion or decline.
Ai Group chief executive Heather Ridout said the recovery in the manufacturing sector was gaining traction.
"Although manufacturers are still battling severe headwinds in the form of the high (Australian) 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," Mrs Ridout said in a statement.
"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."
An improvement in building and infrastructure markets lifted 11 of the 12 sectors to expand in April, the report said.
However, clothing and footwear fell for the fourth straight month.
Citigroup senior economist Joshua Williamson said the rise in the manufacturing activity reflected the rebound in domestic demand amid the lack.
"The input prices component increased by 10.1 points to a level of 73.1 points," Williamson said.
"Not only was this an increase but the pace of increase has increased to be the strongest since the GFC (global financial crisis)."
Mrs Ridout said firms should not become complacent as a recovery in the local economy gathered momentum, with the sector facing challenges from an emerging shortage of skilled workers and the commodity-driven 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," she said.
PricewaterhouseCoopers global head of industrial manufacturing Graeme Billings said the rise in demand for manufacturers during April was welcome but pressures would remain on profits.
"Manufacturers will need to sustain a strong focus on cost management over coming quarters particularly in the face of rising skills shortages," he said.”