The Australian manufacturing sector expanded for a sixth straight month in December, with the Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) declining marginally by 0.6 points to 51.9 to remain above the 50-point level separating expansion from contraction.

The result continued the longest run of expansionary readings since 2010. As in November, five of the eight manufacturing sub-sectors expanded (that is, above 50 points in three-month moving averages): wood & paper products (down 2.9 points to 64.3); petroleum, coal, chemical & rubber products (down 2.2 points to 55.2); non-metallic mineral products (down 3.8 points to 54.2); food & beverages (down 0.6 points to 51.8); and printing & recorded media (up 3.3 points to 50.9). However, the machinery and equipment (up 4.1 points to 47.2), metal products (down 0.4 points to 48.6), and textiles, clothing, footwear, furniture & other (down 2.7 points to 49.3) sub-sectors all contracted.

“The further expansion of Australian manufacturing in December capped a strong second half of 2015,” said Ai Group Chief Executive Innes Willox. “After the extended weakness the sector has experienced over the past five years, this is a most welcome turnaround.”

Of the seven activity sub-indexes, new orders (up 2.1 points to 55.3) and exports (down 1.5 points to 54.9) were strongly positive, which augurs well for further expansion in 2016. Stocks (down 0.9 points to 48.5) and deliveries (down 8.9 points to 46.1 points) were under 50 points, possibly reflecting a drive to reduce stock-related holding costs over the summer break. The manufacturing employment sub-index improved by 0.7 points to 52.4 in December, its highest result since December 2014. The input prices sub-index fell 1.8 points to 65.6 in December, while wages fell 2.5 points to 58.0. The manufacturing selling prices sub-index climbed 3.6 points to 52.2, signalling a mild increase in selling prices for the first time since July. Manufacturers continue to face strong competition and intense pressure on margins from more expensive inputs and subdued but persistent wage pressures.

“With export growth solid and production, sales and new orders all on the rise, there is now a very good base from which manufacturers can launch a prosperous 2016,” Willox added. “That said, declines in automotive assembly, the ongoing contraction of mining investment and tough conditions in global metals markets continue to constrain the growth of the sector and its role in rebalancing the Australian economy.”