Australian manufacturing bounces back as shoppers stockpile

1 April 2020, Written by David Simmons

Australian manufacturing bounces back as shoppers stockpile

Shoppers stockpiling essential household goods has given the Australian manufacturing industry a welcome boost.

Demand for food, groceries and personal care items in the midst of the Covid-19 crisis has encouraged Australian manufacturers to increase production and fill holes left by import disruptions.

The Australian Industry Group (Ai Group) Performance of Manufacturing Index (Australian PMI), a national composite index that indicates the health of the national manufacturing industry, jumped up by 9.4 points to 53.7 in March.

The rise ends four months of sector contraction, with the reading indicating an expansion in activity in the industry.

"Australian manufacturers are being impacted in very different ways by the COVID-19 outbreak," says Ai Group chief executive Innes Willox.

"Some are stepping up to meet surges in purchasing from consumers, businesses and the health sector. Others are finding that disrupted supply chains into export markets and from suppliers of inputs are reducing sales and stifling production."

The data should be read with the knowledge of how fast the situation has changed over the course of March according to Willox who says responses to the March survey recorded later in the month were more likely to be negative than those responses received earlier.

"With over 920,000 jobs at stake, and much of the sector critical to the supply of food, sanitisation and health needs and the infrastructure and supply chains that support them, every effort should be made to keep manufacturing businesses going for as long as they can operate safely," says Willox.

Key findings for March:

  • Five of the seven activity indices in the Australian PMI expanded in March, with sales (up 13.4 points to 56.5), production (up 11.4 points to 51.8), new orders (up 16.2 points to 57.9) and employment all rebounding into expansion due to increased food and other household-related consumable manufactured goods.
  • Finished stocks (up 0.7 points to 49.2) were stable, with declines in food inventories but larger stockpiles elsewhere, while deliveries (up 1.8 points to 48.3) and exports (up 0.1 points to 44.6) contracted due to coronavirus-related freight disruptions.
  • There was a clear divergence between the manufacturing sectors in March, with the food & beverages (unchanged at 59.0 points) and chemicals (up 1.2 points to 50.1) sectors reporting a spike in sales, production and new orders, while the other manufacturing sectors all contracted in difficult trading environments.
  • The input prices index increased by 6.6 points to 64.0 in March, with increased lead times and prices for air freight a concern for both importers and exporters.
  • The selling prices index rose by 4.6 points to a relatively strong expansion at 55.0. With the exception of the metal products sector, selling prices rose across all manufacturing sectors in March and were especially elevated for food & beverage manufacturers as local demand surged.

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Business News Australia

 
Author: David Simmons

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