Manufacturing returned to expansion in February: Ai Group

The Australian Industry Group (Ai Group) has reported that its Australian Performance of Manufacturing Index (Australian PMI) rose by 4.8 points to 53.2 in February, reflecting mild improvements and a rebound into positive territory after a sharp decline in the December 2021–January 2022 report (readings above 50 points indicate expansion in activity, with higher results indicating a faster rate of expansion).

“Australia's manufacturing sector edged back into expansion during February following the sharp labour and supply chain disruptions of the December–January period,” said Innes Willox, Chief Executive of Ai Group. “Price and wage pressures continued in February with some easing in the pace of increase in input prices. At the same time, selling prices accelerated suggesting further recovery of earlier cost increases. Encouragingly, new orders were very strong and point to further strength over coming months.

“The performance of the machinery and equipment sector was the strongest on the back of healthy demand from construction, agriculture, and logistics businesses. The other manufacturing sectors reporting improved performance in February were chemicals; metals products; and textiles, clothing, footwear, paper and printed products.

“In contrast, the food and beverage sector declined again — although at a noticeably slower pace while the building products sector slipped into contraction. Employment eased across the sector while production lifted and sales growth edged ahead.”

Four of the seven activity indices in the Australian PMI expanded in February, with the production (up 2.7 points to 54.6), new orders (up 8.5 points to 59.8) and finished stocks (up 3.4 points to 55.9) indexes expanding at an accelerating rate. Supplier deliveries improved but remained narrowly in contraction (up 11.2 points to 49.0) while employment (down 1.9 points to 43.5) and exports (down 2.5 points to 42.6) fell further into negative territory.

Four of the six manufacturing sectors in the Australian PMI expanded in February, with metal products (up 2.8 points to 51.6) and TCF, paper and printing products (up 0.3 points to 52.3) reporting mild expansion, while chemicals (up 5.4 points to 53.5) and machinery and equipment products (up 3.5 points to 57.0) were relatively strong. The very large food and beverage sector improved but remained in contraction (up 9.3 points to 47.4).

The average wages index increased slightly (up 1.4 points to 64.9) and remained in strong expansion in February and above its long-run average (58.9 points).

The Australian Industry Group’s Australian PMI is a national composite index calculated from a weighted mix of the diffusion indices for production, new orders, deliveries, inventories and employment. An Australian PMI reading above 50 points indicates that manufacturing activity is expanding; below 50, that it is declining. The distance from 50 indicates the strength of expansion or decline. Results are based on responses from a national sample of manufacturers that includes all states and all sub-sectors.

Image: ©stock.adobe.com/au/Monster Ztudio