NAB Manufacturing Activity Index – Q1, 2013

The Manufacturing Activity Index improved in Q1, up to neutral levels – driven largely by less negative levels for business confidence. The index implies no growth in quarterly manufacturing activity – which would represent a slowdown according to recent official data.

By

The Manufacturing Activity Index improved in Q1, up to neutral levels – driven largely by less negative levels for business confidence. The index implies no growth in quarterly manufacturing activity – which would represent a slowdown according to recent official data.

  • NAB’s Manufacturing Activity Index edged higher in the March quarter – back up to neutral levels, from -0.3 points in Q4 2012. This index level implies that there was no growth in quarterly manufacturing activity in Q1.
  • The previous two quarters have seen a large divergence between our index and official data from the ABS. As highlighted in our Q4 release, the ABS series is subject to revision – with the reported increases over this period seemingly at odds with both the results of NAB’s Business Surveys and anecdotal evidence from the sector.
  • Business Confidence in the Manufacturing sector remained negative in Q1 2013 – but less negative than the past few quarters, at -4 points (from -10 points previously). This less negative trend was the key driver behind the Manufacturing Activity Index moving up to neutral levels. Large increases in confidence were recorded in Chemicals, the Textiles, Clothing & Footwear (TCF) sector and Machinery & Equipment.
  • Final product prices recorded marginally softer trends for this index, tempering positive trends from business confidence, with growth down from +0.2% to +0.1%. Printing and Chemicals recorded the largest improvements in final price trends (albeit Printing prices still declined quarter-on-quarter). Wood products and TCF saw declining growth.
  • Purchase costs increased at a marginally slower rate, down to +0.3% (below the trends recorded for the broader economy). By subsector, the changes were relatively modest, with declining trends in Metal products and TCF and an increase in Chemicals.
  • Labour cost trends were also marginally softer at +0.6% – after a significant increase in the last quarter. The sectors that recorded the largest slowdown in labour cost growth were Non-metallic mineral products, TCF and Machinery & Equipment. In contrast, there were negative labour cost trends for Chemicals and Printing & Publishing.
  • The upward trend for the Manufacturing Activity Index was exhibited across the sub-sectors of manufacturing – with the exception of Wood products, which saw a decline in the quarter.

For further analysis download the full report.