Aus manufacturing, food sub-sector expand in March

Ai Group’s Performance of Manufacturing Index (PMI) for the month came in at 57.5. While this represented at 1.8 point drop from the previous month, it easily topped 50, the level that distinguishes expansion from contraction.

Meanwhile the food, beverages and tobacco sub-sector increased 1.6 points to a strong 63.4. According to the report, food and beverages processors noted some new business and a build-up in inventories (some of it due to anticipated industrial action). In addition, new orders and exports were particularly strong during the month.

All seven activity sub-indexes in the PMI expanded in March. Expansions in new orders (62.6 points) and sales (57.7 points) strengthened. Production also expanded while slowing from more robust growth last month (57.6 points) as did employment (54.1 points). Deliveries (52.9 points) and exports (51.1 points) eased to more modest growth, while inventories turned up in March (55.5 points).

However, energy prices (particularly electricity) continue to affect manufacturers. Concerns about energy pricing and security of supply are eroding profitability and confidence. Other input prices are increasing (including steel prices), which is putting manufacturers’ margins under further pressure. Export growth also appears to be easing off for some manufacturers, compared to the strong surge of exports seen in 2016.