Manufacturing expands but supply chain and labour constraints grow: Ai Group

Ai Group has found that the Australian manufacturing sector is expanding, but so is supply chain and labour constraints.

Its Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) increased a further 2.8 points to 58.5 in April – the highest monthly result since July 2021 as Australian manufacturing continued its strong post-COVID recovery, with a third consecutive month in positive territory.

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

However, it saw a decrease in points for new orders (down 0.2 points to 64.8) and sales (down 7.5 points to 56.4). The employment (down 6.3 points to 47.1) and exports (down 10.6 points to 47.7) indexes fell into contraction and slipped below their own long-run averages (49.1 points and 50.0 points respectively).

In addition, the input prices index rose further in April (up 2.0 points to 84.4), due to high global commodity prices, indicating faster input price increases on average for manufacturers. Selling prices edged higher to record the index’s highest reading since 2008 (up 0.2 points to 72.2).

Ai Group chief executive Innes Willox said, “The Australian manufacturing sector continued its current expansion in April following the disruptions of late 2021 and early 2022. The expansion is widespread with five of the six manufacturing sectors reporting improved performance in the month.

“Acceleration was highest in the chemicals and building product sectors. Across the broad manufacturing sector, production and domestic sales were both higher than in March although a fall in exports saw an easing in the pace of improvement in total sales.

“Employment fell in the month with many respondents reporting difficulties filling positions – particularly in skilled occupations. Price pressures continue with input prices and wages both rising further in April and selling prices edging higher as manufacturers seek to recover cost increases in the market.

“New orders increased further in April and, with many businesses feeling capacity constraints and difficulties in securing inputs and staff, the pressures on filling orders are set to continue in coming months.”

Other findings include:

  • Five of the six manufacturing sectors in the Australian PMIexpanded in April, with the TCF, paper & printing sector falling into contraction (down 17.2 points to 41.8) after recording elevated results in March, while the large food & beverage sector recovered following four months of contraction (up 6.3 points to 53.2). The machinery & equipment sector fell sharply but remained in expansion (down 7.6 points to 52.6).
  • The average wages index lifted marginally in April (up 0.3 points to 66.9), indicating a slightly faster pace of increase in wages across the manufacturing sector, on average, compared to March.

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