The rate of recovery slowed over March, just edging over the line that separates expansion from contraction, according to figures from the Australian Industry Group (AIG).

The Performance of Manufacturing Index (PMI), compiled by PricewaterhouseCoopers (PWC), fell 3.6 points to 50.2. The 50-point mark represents the difference between contraction and expansion in the sector.

A drop in overall selling prices and slower growth in new orders contributed to the slowdown, as did a “softening” in construction materials demand.

AIG chief executive Heather Ridout (pictured) said: “We don’t want to call the manufacturing recovery a glass half-empty, but we’d also be hesitant to call it half-full.

“Notwithstanding the strong growth recorded in the December quarter National Accounts, the sector still has ground to make up before production levels are back to where they were in mid-2008,” she added.

“The lacklustre March PMI reading suggests the recovery in manufacturing is battling strong headwinds in the form of weak demand, a strong dollar and rising interest rates. After taking into account higher margins above the cash rate, many businesses already face rates that are above ‘normal’ levels,” said Ridout.

PWC global head of industry manufacturing Graeme Billings said: “The easing of the rate of recovery is a warning to manufacturers that the sector will face an ongoing need to search for ways to lift productivity and performance over the period ahead.

“In this environment, successful businesses will be those that adapt and look for opportunities to innovate as well as maintaining firm control over business costs,” added Billings.

Earlier this year, PMI figures showed activity in the print and publishing sector grow for the first time since September 2009.

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