Australian manufacturing industry performance

Share

19th April, 2021

Manufacturing on the rise: Best industry performance in years

Latest figures indicate the local manufacturing industry has enjoyed a resurgence resulting from increased demand, and it’s having knock-on effects for employment.

The Australian Industry (Ai) Group calculates the national composite index from a weighted mix of other indices, resulting in a general picture of performance health called the Australian Performance of Manufacturing Index (or Australian PMI).

For the last few years it hasn’t been the rosiest picture, until recently.

The latest Australian PMI, containing figures from March 2021, increased by 1.1 points to 59.9 points.

This is the highest monthly result since March 2018 and caps off six consecutive months of solid recovery in the sector following severe disruptions in the second quarter of 2020 due to the global pandemic.

In February 2021, the PMI increased by 3.5 points to 58.8, which was the best result for three years at the time.

To see the growth continuing yet again is encouraging and shows a stronger pace of expansion. In fact, all seven activity indices in the Australian PMI expanded in March.

Of particular note is the rise in the new orders index, which increased 3.6 points. This boost suggests we might continue to hear good news about the rate of production in the months to ahead.


Construction boosts demand for machinery, equipment and workers


While each of the six manufacturing sectors reported positive trends in their trading conditions, the machinery and equipment sector and the textiles, clothing, footwear, paper and printing products sector were most buoyant.

Innes Willox, the Australian Industry Group’s chief executive, expanded on the machinery and equipment sector results in the media release about the latest PMI.

He said, “The machinery and equipment sector benefited from higher demand from across the industrial, mining and agricultural sectors while the metal products and building equipment sectors supplied into healthy levels of residential construction and infrastructure activity.”

Another key finding for March 2021 was that the selling prices index reached its highest level since 2008.

It grew an impressive 8.5 points — excellent news for manufacturers and their bottom lines.

And this has resulted in good news for workers, too, with the average wages index rising again in March — it moved up 5.6 points, to 63.8. This figure is higher than the long-run average of 58.6 points and significantly higher than the numbers that came out in 2020 due to the immediate consequences of pandemic restrictions.

“Employment growth surged with manufacturers’ confidence boosted by buoyant levels of new orders,” Willox said.


Choose ‘Australian Made’ to continue delivering


Of course, the manufacturing industry isn’t out of the woods just yet, as Willox’s statements imply.

“Some growing pains are evident with deliveries of inputs not keeping up with sales of finished products and with reports of skill shortages becoming more widespread,” he said.

For the same reasons, manufacturers should keep a watchful eye on cashflow over the coming months, too.

Willox defines the challenge for the manufacturing industry over the next couple of months, “to maintain momentum as fiscal support is wound back further and while COVID-19 remains a threat.”

However, in March, when talking about the February 2021 PMI numbers, he also noted greater confidence in the industry, which bodes well for 2021.

“Manufacturers are generally positive about the outlook for the next few months with new orders coming in at a greater pace as restrictions on activity and cross-border travel are hopefully wound back.”

As the vaccine continues to roll out, more travel bubbles open up, and state and federal leaders work to shut down coronavirus outbreaks quickly, we should see fewer restrictions and more travel. In turn, this is promising for the manufacturing sector.

Another factor helping local manufacturing businesses these days is a change in perception from the community.

Shay Chalmers, the owner of Strategic Engineering Australia, talked about this in an article written for @AuManufacturing, the Australian Manufacturing Forum’s news and analysis website.

Chalmers said, “The growth that has resulted in many of our manufacturing sectors from community support makes me optimistic that people are starting to see manufacturing for what it is.

“It is a supportive, innovative, agile sector that is here to support the Australian community in our time of need.”

Chalmers said that “Australian Made” is seen as a “high quality, trusted product” and a “globally competitive, globally recognised brand”.

She sees a need to leverage this positive outlook, particularly as we’re such an export-based nation.

“We are such a small market internally, we really need to be outwardly orientated as a manufacturing industry,” she said.


Food and beverage manufacture hits the spotlight


In other promising news, last month saw the Federal Government release its Food & Beverage National Manufacturing Priority roadmap via the Department of Industry, Science, Energy and Resources.

This government’s vision is that “By 2030 we will double the value of Australia’s Food and Beverage manufacturing through a focus on smart food and beverage manufacturing; innovative foods and beverages; and food safety, origin and traceability system.”

The government added the food and beverage sector to its $1.3 billion Manufacturing Initiative fund last month, which is shared across six priority sectors.

Business owners can currently apply for funding from the initiative. It’s now open for food and beverage manufacturing projects that meet eligibility requirements.

The food and beverage sector is Australia’s largest manufacturing area, worth $27.2bn to the Australian economy and employing almost 230,000 people in 2020.

Plus, according to Willox, “Exports of Australian made food and beverage manufacturing products were worth $30.6bn in 2020.”

Willox also said that the government’s strategy will “help the industry to grow exports further.”

He noted, too, “The strategies and direction in the road map will help to secure Australia’s food security – from farm to factory to table.”

The combination of good news for the performance of Australian manufacturing across the board, coupled with targeted government initiatives will raise hopes for continued growth in the industry.

Stay up to date with the latest mid-market business trends, analysis and more by signing up to MYOB’s Bigger Business newsletter.