The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) edged up a further 0.8 points to 51.8 in June to remain above the 50-point level separating expansion from contraction.

The result completes a full year of continuous expansion – the equal longest unbroken period of growth for the Australian PMI since September 2006. Five of the seven activity sub-indexes expanded in June, with the strong performance of production (up by 3.5 points to 54.4), new orders (up by 1.9 points to 54.1) and sales (down by 2.2 points to 53.7) boding well for future months (see table below).

“The mild expansion of manufacturing in June capped a year in positive territory for the Australian PMI,” said Ai Group Chief Executive Innes Willox. “It was a year in which manufacturers took advantage of the boost to competitiveness from the lower Australian dollar both in the domestic market and in export markets.”

Six of the eight manufacturing sub-sectors expanded (that is, above 50 points in three-month moving averages), led by petroleum & chemical products (up 2.2 points to 62.1) and non-metallic mineral products (up 6.8 points to 58.3). Wood & paper products (down 10.0 points to 57.7) and food, beverages & tobacco (down 11.6 points to 53.7) lost some steam, but remained in expansion. While metal products (up 6.4 points to 50.4) and printing & recorded media (up 0.5 points to 50.2) lifted out of contraction, machinery & equipment (down 5.8 points to 44.8) and textiles, clothing & other manufacturing (up 1.8 points to 48.9) remained in negative territory in June.

“The metal products sub-sector, which has been heavily impacted by adverse global conditions in recent times, recorded its first expansion since September 2010,” Willox added. “The important food and beverages sub-sector continued in positive territory although there are now signs of a slowdown and the machinery and equipment sub sector was weaker – in part due to the low levels of business investment across the economy and the gradual wind-down of auto assembly.”

The input prices sub-index increased by 0.6 points in June to remain elevated at 63.8. Wages growth continues to be volatile, with the wages sub-index dropping 5.8 points to 55.5. The manufacturing selling prices sub-index expanded in June, climbing 2.4 points to 53.0 – the strongest result since March 2011.

“The clear imperative for the sector is for a lift in investment both within the sector itself and more broadly across the economy,” Willox concluded.