The manufacturing sector has posted more lacklustre figures, with seven out of eight major sub-sectors recording a contraction in April according to the Australian Industry Group’s Australian Performance of Manufacturing Index (PMI).

The PMI posted a 36.7 point average in April, down 7.7 points in March, where figures below 50 represent a contraction, and the distance from 50 indicative of the strength of the decrease.

"This is the lowest level the Australian PMI® has recorded since May 2009 and the lowest export reading since the export sub index was added in 2004,” Ai Group Chief Executive Innes Willox said.

“The sharp drop in manufacturing production, employment and new orders in April, along with the continued erosion of exports, is deeply concerning.”

The report concluded that the strong Australian dollar is a major burden on the sector, with rising labour and energy costs also contributing to the downward spiral.

“Together they are undermining competitiveness in both the local market and in export markets and they are proving a major barrier to inbound investment in domestic manufacturing facilities with Australia,” Mr Willox said.

Australian PMI®: Key Findings for April:

  • The Australian Performance of Manufacturing Index (Australian PMI®) recorded 36.7 in the month down 7.7 points on March.
  • Contractions in activity were recorded in seven out of the eight manufacturing sub-sectors. Significant contractions were recorded in food, beverage & tobacco products; printing & recorded media; non-metallic mineral products; metal products; and machinery & equipment.
  • Sharp declines in production, new orders and employment were recorded in April, while finished stocks and deliveries declined as well, albeit at a more moderate pace.
  • Capacity utilisation in the manufacturing sector fell 2.4 points to 68.6 (the lowest level since June 2009), consistent with the overall drop in activity in the sector.
  • Exports continued to contract for the ninth consecutive month, as the exports sub-index fell to 24.5 in April.
  • Significant contractions in manufacturing activity were recorded across most States, especially in Victoria where the Australian PMI® fell 8.4 points to 29.1 in April, the lowest level on record.
  • Wages and input prices continued to rise strongly in April, while the decline in selling prices persisted, indicating that profits for manufacturers continue to be squeezed.